what are characteristics of sole proprietorship ?
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Characteristics of a Sole Proprietorship
A sole proprietorship is the most common type of business structure, and the simplest. It is used by businesses that are owned, and usually operated, by one primary individual. You can start a sole proprietorship business without the help or advice of a lawyer. You simply need to get the necessary business licenses and start operating. Although it's possible to start a sole proprietorship business with little paperwork or planning, you'll increase your odds of success if you take the process seriously and do your homework before launching.
Business Income Is Owner Income
If you own a sole proprietorship business, your company's net profit is taxed as your personal income. Net profit is the amount left over after subtracting operating expenses from gross revenue – the amount your business takes in from the sale of products or services. You are liable for taxes on business earnings regardless of how much you actually pay yourself. If you keep your profits in the business to use as operating capital, you still must pay taxes on the money. Conversely, if you pay yourself a salary but your sole proprietorship business loses money, you don't have to pay taxes directly on that salary, although you will have to figure out how to make ends meet while operating at a loss.
Business Capital Is Owner Capital
You aren't legally required to open and use a dedicated business bank account for your sole proprietorship. However, you are required to track every purchase you make for business purposes, whether the funds come from your personal bank account, your business account or the change in your pocket. Similarly, if you operate the business under your own name rather than a trade name, you can deposit checks for business earnings into your personal account, although you must still track and record them as income. If your company is short on cash, you can transfer personal funds to your business account to make up for the shortfall. It's a good idea to keep track of these transfers for accounting purposes but, as far as the Internal Revenue Service is concerned, it's all your money.
Close Management
Sole proprietors tend to manage their businesses closely, knowing the details of different departments and products. Although they may have employees and even managers, sole proprietorship businesses are usually closely identified with their owners, who get to know customers personally. This hands-on management isn't a legal requirement for operating as a sole proprietorship. However, the choice of a sole proprietorship business structure rather than a more complex corporate structure signals a desire for simplicity and directness, which often manifests in a business that is closely held and run.
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A sole proprietorship is the most common type of business structure, and the simplest. It is used by businesses that are owned, and usually operated, by one primary individual. You can start a sole proprietorship business without the help or advice of a lawyer. You simply need to get the necessary business licenses and start operating. Although it's possible to start a sole proprietorship business with little paperwork or planning, you'll increase your odds of success if you take the process seriously and do your homework before launching.
Business Income Is Owner Income
If you own a sole proprietorship business, your company's net profit is taxed as your personal income. Net profit is the amount left over after subtracting operating expenses from gross revenue – the amount your business takes in from the sale of products or services. You are liable for taxes on business earnings regardless of how much you actually pay yourself. If you keep your profits in the business to use as operating capital, you still must pay taxes on the money. Conversely, if you pay yourself a salary but your sole proprietorship business loses money, you don't have to pay taxes directly on that salary, although you will have to figure out how to make ends meet while operating at a loss.
Business Capital Is Owner Capital
You aren't legally required to open and use a dedicated business bank account for your sole proprietorship. However, you are required to track every purchase you make for business purposes, whether the funds come from your personal bank account, your business account or the change in your pocket. Similarly, if you operate the business under your own name rather than a trade name, you can deposit checks for business earnings into your personal account, although you must still track and record them as income. If your company is short on cash, you can transfer personal funds to your business account to make up for the shortfall. It's a good idea to keep track of these transfers for accounting purposes but, as far as the Internal Revenue Service is concerned, it's all your money.
Close Management
Sole proprietors tend to manage their businesses closely, knowing the details of different departments and products. Although they may have employees and even managers, sole proprietorship businesses are usually closely identified with their owners, who get to know customers personally. This hands-on management isn't a legal requirement for operating as a sole proprietorship. However, the choice of a sole proprietorship business structure rather than a more complex corporate structure signals a desire for simplicity and directness, which often manifests in a business that is closely held and run.
hope it is useful...
mark as brainliest...!!
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