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E. Napp
Sole Proprietorship In this lesson, students will identify characteristics of sole proprietorships.
Student will be able to identify and/or define the following terms:
Business OrganizationSole Proprietorship
Zoning LawsLiability
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A businessorganization
is an establishment
formed to carry on
commercialenterprise.
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Sole Proprietorship
• 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 proprietorshipis a commonand popular
form of businessin the United
States.
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Advantages of Sole Proprietorships
• 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 proprietoris the boss of his
business. He makes all decisions
and keeps all profits after taxes.
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Disadvantages of Sole Proprietorships
• 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 proprietorcan lose not only
the businessbut his personal
property.
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Zoning Laws
• 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 townwhere businesses are located.
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Fringe Benefits• 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 insuranceis a fringe benefit.Sole proprietorsusually cannot
afford to offer theirworkers such
benefits.
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A sole proprietorship is the least-regulatedform of business in the United States.
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Questions for Reflection:
• 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?