SOLEPROPRIETORSHIP

AND DIFFERENCE BETWEEN SOLE PROPRIETORSHIP & PATERNERSHIP

Group Member’sNaeem ur RehmanFA15-017

Haroon SaeeedFA15-137

Uzair AhmedFA15-082

Shah JahanFA15-151

Overview

• Describe characteristics of a sole proprietorship.

• List advantages of a sole proprietorship.

• List disadvantages of a sole proprietorship.

• Difference b/w Sole Proprietorship and Partnership

Sole Proprietorship

• Definition A sole proprietorship is a business entity

with a single owner/operator. A business entity is a professional organization

offering something that has real existence.

Sole Proprietorship Characteristics

• Characteristics• The following factors characterize a sole

proprietorship.A. It is the oldest, most common, and simplest

form of business organization.B. One person can serve as the business

decision-maker.C. No registration with the state is required, as

is necessary with a corporation or a limited liability company.

Sole Proprietorship Characteristics

• CharacteristicsD. It is easily set up and maintained.

E. The owner is personally responsible for assets, income taxes, and business debts.

F. It is relatively simple to manage and control.

Sole Proprietorship Advantages

• Advantage A sole proprietorship has several advantages.a) The owner is has his or her own boss.b) No legal formalities are involved in forming or

dissolving the business.c) The money the business makes belongs to

the owner.d) Decisions can be made quickly.

Sole Proprietorship Advantages

• Advantage

E. Start-up costs may be minimal.

F. A sole proprietorship is a good type of organization for a business:

• 1. That will remain small• 2. That does not have great exposure to

liability

Sole Proprietorship Disadvantages

• DisadvantagesA sole proprietorship has several

disadvantages.A. Raising capital to start the business is

difficult.1. Banks are less willing to lend money to one

person for a business venture.2. Banks that approve loans may have higher

interest rates.

Sole Proprietorship Disadvantages

• DisadvantagesB. The owner has unlimited liability.

• Both the business and personal assets of the sole proprietor are subject to the claims of creditors.

• When the owner assumes unlimited liability, he or she may lose all personal and business assets to pay bills or money owed to other parties.

C. The business ends if the owner dies

Sole Proprietorship Disadvantages

• DisadvantageG. The sole proprietor must pay a self-employment tax,

which consists of contributions to Social Security and Medicare.

• In addition, he or she must pay estimated taxes throughout

the year.

H. The sole proprietor may have to register the business name and pay local taxes for owning a business.

Difference b/w Sole Proprietorship and Partnership Sole Proprietorship Partnership

Owner

One person ownership. Minimum two persons

Formation

It can be established easily. Comparatively difficult

Difference b/w Sole Proprietorship and Partnership Sole Proprietorship Partnership

Division of profit & loss Gets all profit and bears loss. Profit and losses are shared as per agreement

Regulation of Business No special act or ordinance Governed by Partnership to govern the working. Act of 1932.

Difference b/w Sole Proprietorship and Partnership Sole Proprietorship Partnership

Scale On small scale due to limited On large scale due to resources. more resources & ability.

Management Business is run and managed Managed and run by

all by one person. or anyone acting for all.

Difference b/w Sole Proprietorship and Partnership

Sole Proprietorship Partnership

Business Secrets Business secrets are closely Business secrets are

known guarded. to all partners.

Dissolution Dissolution is as easy as it’s Dissolution takes

place formation. by an agreement or by

the order of court.

Conclusion

Sole Proprietorship or Partnership both have it’s importance on different levels. For instance, Sole

Proprietorship is suitable for small scale businesses and Partnership is suitable for medium or large size

business.