Lit1 Task 1 a Wgu Essay

2286 Words Jan 17th, 2014 10 Pages
LIT1 Task A

• LIABILITY – The owner and the business are considered as one and so the owner has unlimited liability for the business. Therefore the all of the owner’s personal assets, the business’s assets and the business’s future earnings may be at risk.
• INCOME TAXES – All income for the business goes on the owner’s personal income tax returns whether federal, state or local. One advantage of the sole proprietorship is that the business is not a separate entity and therefore is only taxed once on this income, and another advantage is that all business liabilities may be written off as expenses to offset income. Asset depreciation is an example of this.
…show more content…

• LIABILITY – Partners are jointly or severally liable meaning that should a creditor file suit against the partnership, each partner can be individually liable, or they could share liability. Just like the sole proprietorship, the partnership is 100% liable and creditors may go after business assets, or personal assets of either or both partners.

• INCOME TAXES – Taxed like a sole proprietor where each partner pays taxes on their income from the business like it was there personal income, and expenses may be written off to offset business expenses. Since the partnership is also not considered a separate entity, the business is taxed only once.

• LONGEVITY/CONTINUITY – Once a partner exits the business or dies, it is dissolved and a new business form must be created in order for the business to continue operating.
• CONTROL – Partners have equal control in all decision making and operations of the business. However this can be contractually modified.

• PROFIT RETENTION – Profits are divided according to each partners share in the business. Losses are also shared amongst the partners according to their share.

• LOCATION – Operating in other states only requires a mutual decision amongst the partners. This must be agreed in writing in the form of a signed contract.


Related Documents