Sole Proprietorships
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| Key terms: entrepreneur, asset(s), liability/liabilities, sole proprietorship, partnership, corporation, investment fund, corporate tax, income tax, bankruptcy, entity, shareholder, board of directors, stock, securities, charter, to incorporate, to place/impose/levy a tax, dividend. Other words and expressions:numerous, achievement, self-fulfillment, to suffer losses, to choose, choice, vision, vulnerability, a number (of), to dissolve, flexible, adaptable, to assume responsibility, debts, to raise capital, to share, to distinguish, to split up, to contribute, relatively, incentive, liable, senior, junior, similar (to), drawback, to affect, adversely, separate, apart from, distinct, weighty, to transfer, to do with, subject to, to disclose, permanent, to prevent (from). Linking words and phrases:in view of, first and foremost, besides, like/unlike, since (=because), at the same time, generally, obviously, to start with, it is a fact that..., in order to do smth. |
Entrepreneurship, as one of the factors of production, has its particular function. It brings together the other three – Land, Capital and Labour. When they are successful, entrepreneurs earn profit. When they are not successful, they suffer losses.
There are numerous reasons why people do business. Financial independence and security, profit potential, desire for achievement and self-fulfilment, the opportunity to work at something they really love are some of these reasons.
When organising a new business, one of the most important decisions to be made is choosing its structure. The choice will be based on the entrepreneur’s vision regarding the size and nature of the business, the level of control he or she wishes to have, expected profit of the business, the risks for the business’s assets from liabilities, the business's vulnerability to lawsuits and so on. In view of these requirements, different forms of business organisations - sole proprietorships, partnerships and corporations – have their advantages and disadvantages.
The vast majority of small businesses start out as sole proprietorships. These firms are owned by one person, usually the individual, who has day-to-day responsibility for running the business. A sole proprietor enjoys a number of advantages. First and foremost, it is the easiest and least expensive form of ownership to organize. Sole proprietors are in complete control, within the law, over all decisions. They receive all income generated by the business to keep or reinvest. The business is easy to dissolve, if desired. This form of business organisations is the most flexible and adaptable to changing times because of their ability to restructure themselves and react more quickly and successfully to changes than large corporations. Sole proprietorships do not have to pay special taxes placed on corporations. On the less bright side, however, is the fact that a sole proprietor has unlimited liability. He assumes "complete personal" responsibility for all of his business’s liabilities or debts because, in the eyes of the law, he and his business are one and the same. Besides, it is very difficult for a sole-proprietor to raise investment funds and to attract high-calibre employees from among those who are motivated by the opportunity to own a part of the business.