2 Sole ProprietorshipA sole proprietorship is a business owned by one person.Oldest and most common form of business ownership.About 75% of all business in the United States are sole proprietorships.A person who starts a business is known as an entrepreneur.
3 Advantages of Sole Proprietorship You can make all the decisions!Easy set-up (minimal paperwork)Licensing (obtain from state or local government)Business name (need to get a certificate)Employees (need to get Employer Identification #, EIN)Total ControlProfits to OwnerProfits Taxed OnceFew Government Regulations
4 Disadvantages of Sole Proprietorship Limited capital (any $$ needed comes from your pocket)Unlimited liability (owner is responsible to pay the business debts out of personal assets)Limited human resources (don’t have other managers to ask opinions from)Limited life (business’s life span or existence is determined by the owner’s life span or decision)
5 The PartnershipA partnership is a business owned by 2 or more persons.About 5 % of all businesses in the US are partnerships.
6 Partnership Agreement The partnership agreement is a written document that states how the business will be organized.It includes:Names of partnersName and nature of the businessAmount of investment by each partnerDuties, rights, and responsibilities of each partnerProcedures for sharing profits and lossesHow assets will be divided when and if the partnership is dissolved
7 General Partners and Limited Partners A business partner who has decision-making authority, takes an active role in the operation, and has unlimited liability for all losses or debts of the partnershipAll partnerships have at least one general partnerA business partner who does not take an active role in decision making or running the businessUsually a partner who will provide $$ for the partnership to run, but does not want to participate in actually running the business
8 Advantages of the Partnership Easy set-upMore skills and knowledge (more people to pull ideas from)Available capital (more sources for $$ to get business running)Total control by partnersProfits taxed once
9 Disadvantages of the Partnership Unlimited liabilityPossible disagreement among partners (you are responsible for actions of your partner)Shared profitsLimited life
10 Review What is an entrepreneur? What are the advantages of a sole proprietorship? What are the disadvantages of a sole proprietorship?What is on the partnership agreement?What’s the difference between a general partner and a limited partner? What are the advantages of a partnership? What are the disadvantages of a partnership?