MGTA01H3 Chapter Notes - Chapter 4: Sole Proprietorship
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MGTA01H3 Full Course Notes
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Document Summary
Chapter 4: understanding legal forms of business orientation. => a business owned and operated by one person. Freedom is considered to be the most important benefit of a sole proprietorship. Sole proprietors answer to no one but themselves since they don t share ownership. Tax benefits are another attractive feature since the business and the proprietor are legally one and the same. Unlimited liability is personal liability for all debts of the businesses. Personally liable (responsible) for all debts incurred by the business. If the business fails to generates enough cash, bills must be paid out of the owner s pockets. Another disadvantage is lack of continuity since the business legally dissolves if the owner dies. It is also dependent on the resources of one person whose managerial and financial limitations may constrain the business. It is also harder to borrow money to start up or expand, as bankers fear that they might not be able to recover the money.
