A sole proprietorship refers to a form of organization owned by a single individual. In this business, a single person makes all the decisions and does not have to engage a legal department to approve contracts. The owner of such a business can only use personal funds even though he or she may have separate checking and savings accounts for the business.
The first characteristic of this form of business enterprise is liability. A sole proprietor suffers from unlimited liability. The owner becomes liable personally for all the obligations and debts of the business. The second characteristic is income taxes. Businesses pay federal income tax just like individuals. In a sole proprietorship, the owner …show more content…
A general partnership refers to an associated of two or more individuals in an unincorporated entity to carry out business, as well as share profits and losses (Flat World Knowledge, 2013). The first characteristic that applies to this form of business organization is liability. Each partner in a general partnership is severally and jointly liable for the debts and obligations of the partnership. The second characteristic is income tax. A general partnership faces the same taxation as a sole proprietorship. Income comes from the business and goes to the partners involved. They then pay the usual income tax on the income of the business. The third characteristic is control. In the general partnership, all partners have an equal voice in the management of the business. However, they can modify this as they wish through a contract. The fourth characteristic is profit retention. All the profits in a general partnership are shared equally among the partners. In addition, the partners also share losses equally should they occur. The fifth characteristic is location. To move or expand the business into a different state, all the partners have to come to a mutual