Sole Proprietorship Essential Question What are the advantages

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Sole Proprietorship Essential Question: What are the advantages and disadvantages of a sole proprietorship?

Sole Proprietorship Essential Question: What are the advantages and disadvantages of a sole proprietorship?

Sole Proprietorships • Business owned and controlled by one person • Oldest, simplest, and

Sole Proprietorships • Business owned and controlled by one person • Oldest, simplest, and most common type of business organization • What do you think would be an advantage of owning a business by yourself? Disadvantage?

Sole Proprietorships • Financial resources available to one person are often limited – so

Sole Proprietorships • Financial resources available to one person are often limited – so sole proprietorships tend to be businesses that only require a small amount of capital. • Examples include lawyers, plumbers, carpenters, hairstylists, florists, and farmers.

Sole Proprietorship Advantages 1. Easy start up ▫ ▫ ▫ Requires small amounts of

Sole Proprietorship Advantages 1. Easy start up ▫ ▫ ▫ Requires small amounts of capital, capital few legal considerations Sole proprietors must observe zoning laws which specify the areas of a city or county where various types of business activities can be pursued A city and state business license may be required

Sole Proprietorship Advantages 2. Control o Sole proprietors can act quickly to correct problems

Sole Proprietorship Advantages 2. Control o Sole proprietors can act quickly to correct problems or take advantage of opportunities. o Control tends to lead to personal satisfaction – a successful business is more rewarding.

Sole Proprietorship Advantages 3. Profit o The owner keeps all of the profits. o

Sole Proprietorship Advantages 3. Profit o The owner keeps all of the profits. o Often the main reason for starting the business.

Sole Proprietorship Disadvantages 1. Unlimited liability o Sole proprietors are personally responsible for all

Sole Proprietorship Disadvantages 1. Unlimited liability o Sole proprietors are personally responsible for all business debt – AKA liability

Sole Proprietorship Disadvantages 2. Sole responsibility o The owner is responsible for all aspects

Sole Proprietorship Disadvantages 2. Sole responsibility o The owner is responsible for all aspects of running the business. o Demands on your time and energy may create frustration and reduce your sense of satisfaction and accomplishment.

Sole Proprietorship Disadvantages 3. Limited growth potential o Sole proprietors generally use own savings

Sole Proprietorship Disadvantages 3. Limited growth potential o Sole proprietors generally use own savings or borrow small amounts of money to begin their business o Banks may require collateral – anything of value that a borrower agrees to give up if he or she is not able to repay a loan o Must have capital to expand the business

Sole Proprietorship Disadvantages 4. Lack of longevity o Longevity is the length of a

Sole Proprietorship Disadvantages 4. Lack of longevity o Longevity is the length of a firm’s life or the length of time the business operates. o Sole proprietorships depend on the health, commitment, and competence of one person – so they general have a shorter life span than other forms of business organization.

Ticket Out The Door • Name 2 advantages of a sole proprietorship • Name

Ticket Out The Door • Name 2 advantages of a sole proprietorship • Name 2 disadvantages of a sole proprietorship