Sole Proprietorship

Sole Proprietorship

• E. Napp

• In this lesson, students will identify characteristics of sole proprietorships.
• Student will be able to identify and/or define the following terms:
• Business Organization
• Sole Proprietorship
• Zoning Laws
• Liability

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• A business
• organization
• is an
• establishment
• formed to
• carry on
• commercial
• enterprise.

Sole Proprietorship

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• A sole proprietorship is a business owned and operated by an individual.
• Most businesses in the United States are sole proprietorships.
• However, sole proprietorships account for a small percentage of total sales in the U.S.A.

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• A sole
• proprietorship
• is a common
• and popular
• form of business
• in the United
• States.

Advantages of Sole Proprietorships

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• The greatest advantage of owning a sole proprietorship is the ability of the owner to make all decisions.
• The owner also keeps all profits after taxes.
• Many people enjoy being the boss.

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• The sole proprietor
• is the boss of his
• business. He
• makes all decisions
• and keeps all
• profits after taxes.

Disadvantages of Sole Proprietorships

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• The greatest disadvantage of a sole proprietorship is that the owner has unlimited personal liability.
• Unlimited personal liability means that the owner has the obligation to pay all debts.
• Liability is the legally bound obligation to pay all debts.

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• If the business is sued,
• the sole proprietor
• can lose not only
• the business
• but his personal
• property.

Zoning Laws

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• While there are few laws regulating sole proprietorships, zoning laws do restrict where businesses can be located.
• A zoning law is a law that states where businesses can be established in a town.
• Generally, towns have business districts and residential neighborhoods.

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• A business district is a section of a town
• where businesses are located.

Fringe Benefits

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• Sole proprietors have a hard time attracting good workers because they cannot afford fringe benefits.
• Fringe benefits are payments other than salaries.
• Paid vacation and health insurance are examples of fringe benefits.

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• Health insurance
• is a fringe benefit.
• Sole proprietors
• usually cannot
• afford to offer their
• workers such
• benefits.

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• A sole proprietorship is the least-regulated
• form of business in the United States.

Questions for Reflection:

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• Define business organization.
• What is a sole proprietorship and why is it the most common form of business organization in the United States?
• Why do sole proprietors have unlimited personal liability?
• What are zoning laws and how do they affect neighborhoods?