SOLE PROPRIETORSHIP

Question 1

SOLE PROPRIETORSHIP

DEFINITION

Answer 1

• Owned by SINGLE person (SOLE PROPRIETOR – “SP”)
• Single-owner business is sole proprietorship BY DEFAULT
• Can opt-in by filing

Question 2

SOLE PROPRIETORSHIP

NO LEGAL DISTINCTION between (…………) and (…………….)

Answer 2

• NO LEGAL DISTINCTION between owner and business
• All assets of business owned by individual

Question 3

SOLE PROPRIETORSHIP

GOVERNING LAW

Answer 3

• Single manager with COMPLETE management authority
• No need to provide rules governing rights and duties of owners and managers

Question 4

SOLE PROPRIETORSHIP

GOVERNING LAW

Answer 4

• Single manager with COMPLETE management authority
• No need to provide rules governing rights and duties of owners and managers

Question 5

SOLE PROPRIETORSHIP

GOVERNING LAW

Answer 5

• Single manager with COMPLETE management authority
• No need to provide rules governing rights and duties of owners and managers

Question 6

SOLE PROPRIETORSHIP

NO LEGAL DISTINCTION between (…………) and (…………….)

Answer 6

• NO LEGAL DISTINCTION between owner and business
• All assets of business owned by individual

Question 7

SOLE PROPRIETORSHIP

MANAGEMENT

Answer 7

• SP entitled to make all business decisions
  
  • NO formalities involved
• SP can have employees (“EEs”)
• SP can delegate decision-making authority to EEs

Question 8

SOLE PROPRIETORSHIP

LIABILITY EXPOSURE

Answer 8

• SP personally liable for obligations of business
  - Includes torts arising out of business

Question 9

SOLE PROPRIETORSHIP

TAXATION

Answer 9

• SP entitled to any income generated by business and bears any losses

Question 10

SOLE PROPRIETORSHIP

Reports net income/loss from business on (………………………..)

Answer 10

PERSONAL FEDERAL TAX RETURN

BIZ DOES NOT FILE FEDERAL INCOME TAX RETURN OR PAY FEDERAL INCOME TAX

Question 11

SOLE PROPRIETORSHIP

LEGAL NAME

Answer 11

• Business same legal name as SP
• To avoid confusion, common for SP to use DBA in signature line of a document