Podcast
Questions and Answers
What is a sole proprietorship?
What is a sole proprietorship?
Who makes all decisions in a sole proprietorship?
Who makes all decisions in a sole proprietorship?
The sole proprietor
Sole proprietors want to give orders rather than take them.
Sole proprietors want to give orders rather than take them.
True
What do business tax deductions do for business owners?
What do business tax deductions do for business owners?
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What is the main financial risk of a sole proprietorship?
What is the main financial risk of a sole proprietorship?
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How many sole proprietorships are there in America?
How many sole proprietorships are there in America?
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Sole proprietors keep all profits from their business.
Sole proprietors keep all profits from their business.
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What type of responsibility does a sole proprietor bear?
What type of responsibility does a sole proprietor bear?
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What is the purpose of a business license?
What is the purpose of a business license?
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Match the negatives of sole proprietorships with their descriptions:
Match the negatives of sole proprietorships with their descriptions:
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What does collateral mean?
What does collateral mean?
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Study Notes
Sole Proprietorship Overview
- Sole proprietorship is a business structure owned and managed by a single individual, who has complete control and accountability.
- There are over 20 million sole proprietorships in America, making it the most common form of business ownership.
Characteristics of Sole Proprietorships
- Sole proprietors make all decisions independently and prefer to give orders rather than take them.
- Owners benefit from keeping all profits generated by the business but also bear full financial responsibility and liability.
Financial Aspects
- Business tax deductions offer favorable tax status, helping to lower overall taxable income for sole proprietors.
- Business deductions can significantly reduce the owner's tax burden by reflecting expenses incurred in business operations.
Legal Considerations and Liabilities
- The owner of a sole proprietorship has unlimited liability, meaning personal assets can be at risk if the business incurs debts or legal issues.
- Collateral refers to assets that hold value and may be sold for cash, which could be used to secure loans or fulfill financial obligations.
Challenges and Negatives
- Sole proprietors face several challenges including significant personal liability and the necessity to work long hours and hard, often exceeding typical working conditions.
- There is also a lack of permanence in sole proprietorships, as the business is closely tied to the owner, impacting its longevity upon their departure or inability to continue operating.
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Description
Test your knowledge on the key characteristics of sole proprietorships with these flashcards. Explore concepts from ownership, accountability, decision-making, and tax deductions. Perfect for anyone studying business ownership structures.
