MGT 401 Lecture Notes - Lecture 19: Sole Proprietorship
16 Jan 2016
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Sole proprietorship: an unincorporated business owned by one person. If an individual runs a business without taking any formal steps to create an organization, she automatically has a sole proprietorship. Is not required to hire a lawyer or register with the government. The company is not even required to file a separate tax return because the business is a flow-through tax entity. Owner must pay personal income tax on the profits, but the business itself does not pay income taxes. States generally require sole proprietors to register their business name if it is different from their own. For example, linda would file a d/b/a or doing business as certificate. As in the case for all forms of organization, corporations have their own advantages and disadvantages. If a business flops and cannot pay its bills, shareholders lose their investments in the company but not their other assets.
