Management and Organizational Studies 2275A/B Chapter Notes - Chapter 14: Loan Guarantee, Net Income, Tax Avoidance

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Document Summary

Sole proprietorship: an unincorporated business organization that has only one owner. Represents from legal perspective the simplest form of business organization b/c there is no legislation pertaining to the sole proprietorship as such. Unlimited liability: unrestricted legal responsibility for obligations: but just business assets but also person can be seized to pay outstanding debt. Should the owner die: business is terminated: proprietorship has a limited life span. Workers my not be motivated or able to provide high level commitment b/c it"s a one man show. No formal or specialized tax rules governing it. Profits and losses reported on the owner"s personal income tax return. May be favourable or unfavourable depending on circumstances, including whether owner"s marginal tax rate is higher or lower than the applicable corporate tax rate. Can"t be sold or transferred to another b/c it has no legal status. However, assets associated with proprietorship such as inventory are transferable.

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