financial rewards
to fail
challenging
sole proprietorship -
the partnership -
revenues -
expenses
assets , ,
liabilities () ,
regulations ,
legal requirements ()
under a rigid charter
is legally liable for all debts
to raise capital - ,
leery ,
is pledged to repay
to dissolve
to terminate
to file for bankruptcy
to cease business
Many people find the potential independence and financial rewards that can come from owning a small business very appealing. For some, owning their own business has been a lifelong dream. Many people, however, hesitate to pursue this dream because they dont think they have enough education, experience or money or are simply afraid they might fail.
Whatever the reason, owning your own business may be one of the most challenging, satisfying, demanding and rewarding things you do in your life. However, there are real risks and difficulties in starting any new business.
While each business is different, there are some basic things every small business needs to succeed. Key among these is a good idea, hard work, knowledge combined with common sense and imagination, plus the willingness and determination to make an idea into reality.
The three traditional forms of business are the sole proprietorship, the partnership, and the corporation.
A sole proprietorship is business owned by an individual and often managed by that same individual. In other words, the revenues, expenses, assets and liabilities of the sole proprietorship are the revenues, expenses, assets, liabilities of the owner. A sole proprietorship is also referred to as single proprietorship, individual proprietorship, individual enterprise, and the one-person business.
A sole proprietorship is the oldest and the most common form of ownership. Some examples include small retail shops, doctors and lawyers practices and restaurants.
A sole proprietorship is the easiest form of business to organize. All one needs is some knowledge about business, start-up capital and knowledge of regulations. The only legal requirements for starting such a business are a municipal license to operate a business and a registration license to ensure that two firms do not use the same name. The organization costs for these licenses are minimal.
A sole proprietorship offers the owner freedom and flexibility in making decisions. Major policies can be changed according to the owners wishes because the firm does not operate under a rigid charter. Because there are no others to consult, the owner has absolute control over the use of the companys resources. As mentioned earlier, the financial condition of the firm is the same as the financial condition of the owner. Because of this situation, the owner is legally liable for all debts of the company. If the assets of the firm cannot cover all the liabilities, the sole proprietor must pay these debts from his own pocket. Some proprietors try to protect themselves by selling assets such as their houses and automobiles to their spouses and relatives. A sole proprietorship may have difficulty in raising capital because lenders are leery of giving money to only one person who is pledged to repay.
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A sole proprietorship can be dissolved as easily as it can be started. A sole proprietorship can terminate on the death of the owner, when a creditor files for bankruptcy, or when the owner ceases doing business.
