Types of Business Ownership: Sole Proprietorship

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So far we have discussed the meaning and what a business is, and how to set your ethical standards, today we begin talking about owning a business and the styles of ownership.
First let's lay out the many styles of ownership
  • Sole Proprietorship
  • Partnership
  • LLC
  • Corporation
  • Holding Company
  • Conglomerate
  • Non-Profit
  • Co-op
A sole proprietorship is where one individual owns the company and all of its assets and debts. The best example of these in my mind are barbershops. Many of you see these one man barbershops in your home town. The only employee is usually the owner and the product is of course in most instances a service (haircut). The owner here has to track all of his expenses and income and file this as part of his business tax . Although in most cases the owner roles all of it into his personal income tax and pays tax on it at the individual rate. In some states or should I say most states the owner must have permit to run the establishment and must have a taxpayer ID from the state if they collect sales tax. The owner figures his profitability by taking his total income and subtracting his expenses such as rent, materials, power usage, etc. also if he owns the property he can claim a portion of the building costs. What are the advantages to this type of ownership. First you are in total control of the business. Second you spend less time on paperwork and taxation issues. Third you have no human resource issues. The disadvantages are it requires you to be there for the business to be open. When you are away you make no income. Second, you have to know how to keep your own books or add the cost of an accountant . Lastly only you are to blame for any issues and that can be sometimes hard to accept. Sole proprietorships are in many ways the most rewarding business and at the same time the most demanding. You have to be totally committed to the business and willing to sacrifice to succeed.

Next Week we will discuss Partnerships and LLC's ( limited liability corporations) .
Remember that if you have questions about anything we talk about in the Memo e-mail me at mcdowellcharles517@yahoo.com and I will get you as good an answer as possible.

This is a teaching and learning blog about business, hoping to answer the many basic questions that people have and eliminate some of the myths about owning and running a business.

Chuck 

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