This document discusses sole proprietorships as a form of business ownership. A sole proprietorship is a business owned and managed by one individual. It has advantages such as easy start-up and closure, being your own boss with full control, and retaining all profits. However, it also has disadvantages like limited growth potential and benefits as well as risk of business ending if the owner dies, retires, or goes bankrupt. The sole proprietor is typically an active manager working in the business and responsible for its success or failure.

1. - BBA 1101 -
INTRODUCTION TO BUSINESS
Summer 2014-15
Faculty: Shama Islam

2. Forms of Business Ownership
Chapter # 2
LECTURE 2

3. Each form of business ownership has
advantages and disadvantages.
If you are planning to go into any type of
business, you need to review these pros and
cons and determine which form of
ownership meets your needs.
WHAT TYPE OF BUSINESS IS
RIGHT FOR YOU?

4.  Capital Requirements
The amounts of funds necessary to finance the operation.
 Time Requirements
The time needed to operate the business and provide guidance
to employees.
 Tax Liability
What taxes a business must pay to various
governments on earnings of business.
What Factors Should We Consider?

5. What Factors Should We Consider?
 Management Abilities
The skills needed to plan, organize and control the business.
 Risk
The amount of personal property a person is willing to lose
by starting a business.
 Control
The amount of authority the owner exercises.

7.  Sole Proprietorship
A business that is owned and usually
managed by one person/individual.
 Partnership
A business owned by two or more people.
 Corporation
A legal entity with authority to act and have
liability separate from its owners.
FORMS OF BUSINESS

8. SOLE PROPRIETORSHIP
A business that is owned and usually
managed by one person/individual.
The person may receive help from
others in operating the business, but
is the only boss: the sole proprietor
is the company.
￭ Small Independent Retail Shops
￭ Hardware store
￭ Bakery
￭ Restaurant
￭ Tea-stall

9. SOLE PROPRIETORSHIP
The Sole Proprietor often aided by
one or two employees, operates a
shop that frequently caters to a
group of regular customers.
The Capital (money) needed to
start and operate the business is
normally provided by the owner
through personal wealth or
borrowed money.

10. SOLE PROPRIETORSHIP: FEATURES
 Capital provided by one
through personal wealth or
borrowed money
 Should be an active manager
 Control the operation
 Supervise the employees
 Make and take the decisions
 Should have good
managerial ability

11. SOLE PROPRIETORSHIP: ADVANTAGES
 Easy of Starting and Ending the Business
All one has to do to start a sole proprietorship is buy or lease the
needed equipments and put up some announcements saying s/he is in
business. It is just as easy to get out of business; s/he simply stops.
Being Your Own Boss
Working for others simply does not have the same excitement as
working for own-self—at least, that’s the way sole proprietorship feel.

12. SOLE PROPRIETORSHIP: ADVANTAGES
 Control
The owner has the freedom to make the final decisions on any sector.
 Secrecy
As the owner is one there is no change or limited changes to be shared of
the business secret information.
 Pride of Ownership
People who own and manage their own businesses are rightfully proud of
their work. They deserve all the credit for taking then risks and providing
needed goods or services.

13. SOLE PROPRIETORSHIP: ADVANTAGES
 Sole Participation in Profits and Losses
All profits earned or losses incurred by operating the
business are to be shared by the Individual.
 Retention of Company Profit
Other than the joy of being boss, there is nothing like
the pleasure of knowing that one can earn as much as
possible and not have to share that money with
anyone.
 Tax Breaks
A major advantage of the proprietorship is that the
businesses pays no income tax. A Corporation pays
taxes on profits; its owners, the shareholders pay taxes
on dividends. Whereas, a sole proprietor pays no tax
on business profits, instead the person is taxed as an
individual on all his/her income earned from the
business.

14. SOLE PROPRIETORSHIP: DISADVANTAGES
 Few Fringe Benefits
As the owner is the boss, s/he loses the fringe
benefits that often come from working for
others. (Health insurance, disabilities
insurance, sick leave and vacation pay)
 Limited Growth
Expansion is often show since a sole
proprietorship relies on its owner for most of
its creativity, business know-how and
funding.
Limited Life Span
Death, Illness, bankruptcy or retirement of the
owner terminates the proprietorship.

15. SOLE PROPRIETORSHIP
The sole proprietor is usually an active manager, working in the
business. He or she controls the operations, supervises the
employees and makes the decisions.
The sole proprietor who is the owner usually accounts for
the success and failure of the business.