1. Agriculture Business Management Sole Proprietorship

2. Objectives 1. Describe characteristics of a sole proprietorship. 2. List advantages of a sole proprietorship. 3. List disadvantages of a sole proprietorship.

3. Key Terms Business entity Sole proprietorship Unlimited liability

4. Interest Approach How many of you own your own business? How many of you would like to run your own business? Why do own or want to own your own business?

5.  A sole proprietorship is a business entity with a single owner/operator  A business entity is a professional organization offering something that has real existence Characteristics

6.  Oldest, most common, and simplest form of business organization  One person can serve as the business decision- maker  No registration with the state is required, as is necessary with a corporation or a limited liability company (LLC)

7. Characteristics  Easy to set up and maintain  Owner is personally responsible for assets, income taxes, and business debts  Relatively simple to manage and control

8. Sole Proprietorship Advantages  The owner is his or her own boss  No legal formalities are involved in forming or dissolving the business  The money the business makes belongs to the owner  Decisions can be made quickly

9. Sole Proprietorship Advantages  Start-up costs may be minimal  Good type of organization for a business  That will remain small  That does not have great exposure to liability  That does not justify the expenses of incorporating and ongoing corporate formalities

10. Sole Proprietorship Disadvantages  Raising capital to start the business is difficult  Banks are less willing to lend money to one person for a business venture  Banks that approve loans may have higher interest rates

11. Sole Proprietorship Disadvantages  Owner has unlimited liability  Both the business and personal assets of the sole proprietor are subject to the claims of creditors  When the owner assumes unlimited liability, he or she may lose all personal and business assets to pay bills or money owed to other parties  B usiness ends if the owner dies

12. Sole Proprietorship Disadvantages  Owner is responsible for the entire business  Owner is responsible for personal health insurance  Owner is responsible for withholding and paying all income taxes

13. Sole Proprietorship Disadvantages  Must pay a self- employment tax, which consists of contributions to Social Security and Medicare  In addition, he or she must pay estimated taxes throughout the year  May have to register the business name and pay local taxes for owning a business

14. REVIEW What are the characteristics of a sole proprietorship? What are some advantages of a sole proprietorship? What are some disadvantages of a sole proprietorship?