LAW 122 Study Guide - Midterm Guide: Sole Proprietorship

• School: Ryerson University
• Department: Law and Business
• Course: LAW 122
• Professor: Theresa Miedema

Document Summary

Exists when a person carries on business on their own, without adopting any other form of business. Gets all the benefits and bears all the burdens of the business. Responsible for: performing all contracts entered into in the course of the business, including contracts with customers, suppliers, employees and lenders, all torts committed personally in connection with the business. That person is vicariously liable for all torts committed by employees in the course of their employment. For income tax purposes, the income or loss from the sole proprietorship is included with the income or loss from other sources in calculating the sole proprietor"s personal tax liability. Simple to start; simple to administer (easy to setup). Unlimited personal liability: means that third parties may take all the sole proprietor"s personal assets to satisfy the business"s obligations. Can only raise money by personal borrowing. As business grows, these problems continue to grow.