A sole proprietorship is most likely run by
There are more sole proprietors in the United States than any other type of business. According to the U.S. Census Bureau, there were more than 21 million sole proprietorships registered in 2015. Sole proprietorships aren't just easy to start – some are accidental. Show Sole Proprietorships Are Easy to Set UpA sole proprietorship is so easy to set up, many people don't even know they already own one. Any business that is unincorporated and owned by a single person is a sole proprietorship. Freelance writers, for example, are sole proprietors whether they have declared it to be so or not. There is no distinction between the business owner and the business, so a sole proprietor is responsible for all the business debts and liabilities. However, this doesn't mean that all sole proprietors don't need to formally register their business. In many cases, you need to apply for a business license and permits from the federal, state or local government to conduct your business. Advantages of a Sole ProprietorshipIn addition to how easy they are to form, sole proprietorships have other benefits compared to other business structures. They are inexpensive to set up. While you should always consult a lawyer, legal fees are minimal, and many people start a sole proprietorship without hiring a lawyer at all. A sole proprietorship is easy to dissolve or put on hold, too – you just stop working. Taxes are relatively easy to file for a sole proprietor. Your business income is added to your personal income, and you, as the owner, pay those taxes. According to the U.S. Small Business Administration, sole proprietor tax rates are lower than any other business structure. To file your taxes, you use Schedule C and then transfer the bottom line amount to your personal return. A sole proprietorship gives you complete control over your business. There are no partners or shareholders to consult. If you want to buy a new truck for your business or redesign your business cards, you can do it any time. Working solo doesn't limit you in having a name for your company either. It's easy to register your business with a "doing business as" or DBA name, provided the name you choose isn't being used by another business. Disadvantages of a Sole ProprietorshipWith all of the advantages, there are distinct disadvantages for owning a sole proprietorship. To begin with, running a business by yourself can be hard work. Some sole proprietors find themselves working exceptionally long hours until they burn out. Others just don't have the time to properly invest in their businesses for it to succeed and end up keeping their day jobs while their businesses wither away. Because there is no legal distinction between your business and you as an owner, you are accountable for all liabilities. If your business owes money to a lender, you are personally responsible for paying it. Your lender – and the courts – don't care if it comes from your business account or your personal account. If you make a mistake and someone sues your business, you will likely have to pay out of your own pocket if the business can't cover the debt. It can be more difficult for a sole proprietorship to raise capital since banks are often reluctant to approve loans to ventures under this business structure. You can't sell shares in your company as a corporation can. You can't bring in a business partner in a sole proprietorship. To do either of these things, you would have to form a corporation or a partnership. Finally, one of the reasons sole proprietorships are so common is that entrepreneurs often use this business structure as a stepping stone in the formative months of their new businesses. Because it's cheap and easy to set up, a new business owner can use this structure to get the business off the ground. Later, when the disadvantages become a problem, they can hire a lawyer and do the necessary paperwork to "upgrade" to a more formal business structure, like a partnership, limited liability company (LLC) or a corporation. Sole proprietorships A sole proprietorship is a business that is run by a single individual who makes all the decisions, although the proprietor may engage employees. The sole proprietor is personally entitled to all of the profits and is responsible for any debts that the business incurs. Advantages of forming a sole proprietorship
Disadvantages of forming a sole proprietorship
Partnerships A partnership is the relation which subsists between persons carrying on a business in common with a view of profit. The law relating to partnership is codified under the Partnership Ordinance (Cap. 38) and the Limited Partnerships Ordinance (Cap. 37) which stipulate that the rules of equity and common law applicable to partnerships shall continue in force except so far as they are inconsistent with the express provisions of such Ordinance. However the relation between members of any company or association which is (a) registered as a company under any Ordinance relating to the registration of joint-stock companies; or (b) formed or incorporated by or in pursuance of any other Ordinance, or any enactment or instrument, is not a partnership within the meaning of the Partnership Ordinance. In broad terms, there are two types of partnership: general partnership and limited partnership. There is however a third type of partnership called limited liability partnership under the Legal Practitioners Ordinance (Cap.159), which is available only to law firms in Hong Kong. General partnership Each partner in a general partnership is personally liable for all the debts and obligations of the partnership. Each partner can bind the partnership and is responsible for the acts of other partners taken in the ordinary course of business. All partners are entitled to share in the profits of the partnership equally unless they agree otherwise. A general partnership is not a separate legal entity from its partners and cannot acquire rights, incur obligations or hold properties in its own right. Limited partnership A limited partnership must consist of at least one general partner and one limited partner. A general partner is a partner who is personally liable for all the debts and obligations of the limited partnership. A limited partner is a partner who at the time of entering into the limited partnership contributes a sum or sums as capital or property valued at a stated amount and is not liable for the debts and obligations of the limited partnership beyond the amount so contributed. Limited partners shall not, during the life of the partnership, draw out or receive back any part of their contribution and if they do, they become liable for the debts and obligations of the partnership up to the amount so drawn or received back. A limited partner has no power to bind the partnership and must not take part in the management of the partnership business. If a limited partner takes part in managing the partnership business, he or she shall be liable for all the debts and obligations of the partnership incurred while taking part in the management. A limited partnership must be registered as such with the Registrar of Companies in accordance with the Limited Partnerships Ordinance (Cap. 37). Until it has been so registered, the partnership will be deemed as a general partnership and every limited partner shall be deemed as a general partner. A limited partnership is required to notify the Registrar of Companies and where applicable to advertise in the Gazette if there are certain changes during the life of the partnership such as change of partnership name, principal place of address or the nature of the business or the partners (sections 8 and 9 of the Limited Partnerships Ordinance). Like a general partnership, a limited partnership is not a legal entity. Limited liability partnership Only law firms in Hong Kong may choose to operate in the form of a limited liability partnership (“LLP”). According to the Legal Practitioners Ordinance (Cap. 159), an innocent partner of an LLP will not be personally liable for the debts, obligations and liabilities of the LLP that arise from the provision of professional services by the LLP and as a result of the default of another partner, an employee, agent or representative of the LLP. This protection for LLP partners is however limited as follows:
The protection for LLP partners applies only if the law firm had complied with the following conditions at the time of the default:
Subject to certain exceptions and conditions in the Legal Practitioners Ordinance (Cap. 159), if an LLP is unable to meet its debts, obligations and liabilities or the value of the remaining partnership property is less than the LLP’s debts, obligations and liabilities immediately after the LLP has made a distribution of its partnership property, the recipient(s) of that distribution may be liable to pay some or all (as the case may be) of the distribution back to the LLP. Every partner remains liable for the LLP‘s ordinary business obligations such as office rent and staff salaries. LLPs are not governed by the Limited Partnerships Ordinance but are subject to the Legal Practitioners Ordinance (Cap. 159) and its subsidiary legislation. Being a form of partnership, LLPs are also subject to the Partnership Ordinance and any other law that applies in relation to a general partnership, unless they are inconsistent with the Legal Practitioners Ordinance (Cap. 159). Transfer of interests The transfer of interests in a partnership to existing or new partners may be carried out in accordance with any partnership agreement or other agreement that is entered into by all of the partners. In practice, there is little market for the transfer of the interests of a partnership to public investors. Name of partnership The name of a partnership can be formed by combining the names (usually the surnames) of the partners. If there are many partners, then they may name the partnership "XX Company" or "XX & Co". An LLP must include the words “Limited Liability Partnership” or the abbreviation “LLP” or “L.L.P.” as part of its English name and the words “有限法律責任合夥” as part of its Chinese name. Subject to aforesaid, the English name of a partnership must not include the words "Limited" or "Company Limited" and the Chinese name of a partnership must not include the words “有限” or “有限公司”, as this is an offence that carries a fine. Note that a partnership can also use a business name or trade name (for example, XX Café) in addition to the partnership name. Partnership Agreements The Partnership Ordinance and the Limited Partnerships Ordinance contain default provisions on matters relating to profit and loss sharing, management of partnership business, changes to the composition of partners and duration and termination of partnership which shall apply to a partnership that does not have an agreement to the contrary. Such default provisions may not suit the manner in which partners would like to run the business and it is therefore important for the partners to enter into a Partnership Agreement to modify these provisions and agree on other relevant matters e.g. settlement of disputes. You are strongly recommended to appoint a lawyer to prepare the Partnership Agreement. Advantages of forming a partnership
Disadvantages of forming a partnership
Limited Companies A limited company is a type of company formed and registered in accordance with the Companies Ordinance (Cap. 622) (“the CO”). The most common types of limited company used to run a business is the company limited by shares. Companies limited by shares A company is a company limited by shares if the liability of its members is limited by the company’s articles to any amount unpaid on the shares held by the members. The key characteristics of a company limited by shares can be described as follows:
Companies limited by guarantee A company limited by guarantee is a rather peculiar kind of company. It has many of the same characteristics as a private company limited by shares subject to the following key differences:
Advantages of forming a company limited by shares
Disadvantages of forming a company limited by shares
A company director may have to take personal liability for a contract that is drawn up in the company's name but subsequently proves not to be enforceable against the company (if a potential director signed a contract before the date of formal incorporation of the company, for example). Directors may also be personally liable for claims if they act negligently in the performance of their job duties. Who controls a sole proprietorship?The owner maintains 100% control and ownership of the business. A sole proprietorship can have only one owner, and that owner is entitled to the profits and control of the business.
Who controls a sole proprietorship quizlet?In sole proprietorship, the owner is the business. Anyone who does business without creating a separate business organization has a sole proprietorship. Seventy-two percent of all U.S. businesses are sole proprietorships, yet they account for 4 percent of all sales receipts earned by businesses.
Who runs a proprietorship?A sole proprietor is someone who owns an unincorporated business by himself or herself. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation.
What is a sole proprietorship answer?A sole proprietorship is a business that can be owned and controlled by an individual, a company or a limited liability partnership. There are no partners in the business. The legal status of a sole proprietorship can be defined as follows: It is not a separate legal entity from the business owner.
|