MGM101H5 Lecture Notes - Lecture 6: Sole Proprietorship, Legal Personality, Double Taxation

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18 Oct 2018
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October 17, 2018
MGM101
PROFESSOR DAVE SWANSTON
CHAPTER: FORMS OF BUSINESS OWNERSHIP
Types of ownership:
Sole proprietorship
Partnership
Corporations
Sole proprietorship:
Business owned and managed by one person
Advantages:
Ease of formation:
Starting a business is easy in sole proprietorship
All you have to do is buy or lease the needed equipment and create
awareness that you are doing this particular business
There is Single owner thus there is no need to consult with anyone
regarding business decisions
Permit or license from government is required to operate business
Being your Own boss:
Flexible work schedule
No supervisor to report to
Owner is responsible for all the tasks and duties
Owner is responsible both for failures(mistakes ) and success
Pride of ownership:
People managing their own businesses have a sense of pride as they are
solely responsible for success of their decisions
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They are proud of their work
Owners Take credit for taking risks
Retaining profits:
Being the only operator of business there is no need to share the profits
from sales with anyone else
Thus it acts as a motivator to work even more and earn as much as you
want
No special taxes:
All profits are taxed under personal income as owner and business are
considered the same entity
Any losses can be claimed by owner under other earned incomes
Less regulation:
Proprietorships are regulated by provisional/territorial government
Proprietorship need to be registered but are less regulated than
corporations
Disadvantages:
Unlimited liability:
Owners are responsible for all debts of business
Owner is personally liable for all business debts
Limited financial resources:
Funds are limited to the funds owner can gather
All the cost of resources and inventory are to be paid by the owner
But sole proprietors can only earn limited money in comparison to
corporation and other businesses
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