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 Organization

Sole Proprietorship

Zoning Laws

Liability

A businessorganization

is an establishment

formed to carry on

commercialenterprise.

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.

A sole proprietorshipis a commonand popular

form of businessin the United

States.

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.

The sole proprietoris the boss of his

business. He makes all decisions

and keeps all profits after taxes.

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.

If the business is sued,the sole proprietorcan lose not only

the businessbut his personal

property.

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.

A business district is a section of a townwhere businesses are located.

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.

Health insuranceis a fringe benefit.Sole proprietorsusually cannot

afford to offer theirworkers such

benefits.

A sole proprietorship is the least-regulatedform of business in the United States.

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?