How would you define each of the five business organizations?
A sole proprietorship is the easiest type of business to organize. If any individual decides to begin operating a business, a sole proprietorship has been formed. Simply put, the individual and the business are one and the same. Most small businesses begin as sole proprietorships with the vision, labor, and investment of the business owner. Many professionals including accountants or attorneys may begin operating as sole proprietors using their personal names, such as B. L. Smith Accounting, as opposed to a trade name, such as BLS Accounting Services. A sole proprietorship requires no legal forms or registration.
Although, many states require that trade names be reserved or registe...
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...red with the state. Some localities may requiring registration or licensing to conduct certain activities such as plumbing or electrical contractors, or rental property managers. Sole proprietorships cannot be bought or sold. If the owner retires or closes the business, it is simply dissolved upon cessation of business activities. All rights to income and responsibilities for debts belong to the owner, and are considered part or their personal income and debt. The sole proprietorship pays income taxes as an individual.
The owners files IRS for Schedule C or C-EZ to report profit or loss from business activities. The profit is reported on the 1040 series and taxed at the corresponding rate. Also, sole proprietors must pay Self-employment taxes on Schedule SE, which covers social security and medicare taxes. If the sole proprietor has employees, then they will also file Form 940, Federal unemployment taxes (FUTA) and must set up a withholding account for their employees federal, state, and local tax withholdings and payments, and must match social security and medicare taxes.