Sole Proprietorship and Partnership Overview

Sole Proprietorship

• Oldest, simplest, and most common business form
• Owned and operated by one person
• Sole proprietor is personally responsible for all business debts and obligations

Sole Proprietor Obligations

• Secure licenses and business permits
• Register the business name
• Pay taxes
• Personally liable for all business debts and obligations

Sole Proprietorship Advantages

• Sole enjoyment of profit
• Lower government fees
• Lower capital requirements

Sole Proprietorship Disadvantages

• Personal liability for all debts
• Burdensome for the proprietor to make all decisions
• Limited capital-raising ability
• Business existence depends on the proprietor's life, health, and will

Partnership Definition and Concept

• Two or more individuals contribute money, property, or labor to a common fund with the goal of dividing profits
• Partners become co-owners of contributions and acquired property
• Partnership begins upon contract execution, unless otherwise stipulated

Essential Partnership Requisites

• Valid contract
• Contribution of money, property, or labor to a common fund
• Lawful business objective
• Purpose of profit-sharing
• Two or more individuals with legal capacity to contract

Partnership Nature

• Based on trust and confidence (fiduciary nature)
• Actions of any partner bind the partnership in their usual trade or business

Partnership Principle: Delectus Personae

• No one can become a partner without the consent of all existing partners

Partnership Classifications

• Liability

  • General Partnership: All partners are personally liable for debts beyond contributions
  • Limited Partnership: Includes general partners (fully liable) and limited partners (liable only up to their contribution)

• Duration

  • Partnership at Will: No fixed duration, termination at the will of the partners
  • Partnership for a Specific Period: Agreed duration or until a specific undertaking is accomplished

Partner Classifications

• Capitalist Partner: Contributes capital (money or property)
• Industrial Partner: Contributes labor or skills
• Capitalist-Industrial Partner: Contributes both capital and labor
• General Partner: Liable beyond their contribution
• Limited Partner: Liable only up to their contribution

Profit Distribution in Partnerships

• Determined by partner agreement
• In the absence of an agreement, profit distribution is proportionate to contributions
• Industrial partners receive a fair and equitable share

Loss Distribution in Partnerships

• Follows the same rules as profit distribution

Partnership Dissolution

• Change in partner relationships resulting in a partner ceasing to be part of the business
• Can occur due to various factors like death, withdrawal, or bankruptcy

This quiz explores the basics of sole proprietorship and partnership business structures. It covers their definitions, advantages, disadvantages, and the obligations of sole proprietors. Test your understanding of these common business forms and their implications on business operations.