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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?