Lesson 5.1 Sole Proprietorships

Study the bar graph showing "Survival of Sole Proprietorships." Suppose there were 100 new sole proprietorships in Year 1. How many would still be in business in Year 3?

50

A sole proprietor may have to turn down work if he or she does not have enough time to do it. The obvious cost of this is the loss of money the sole proprietor would have received for the work. What is a hidden cost of turning down work?

A hidden cost might be that the individual or business that wanted the work done will not ask the sole proprietor to do the work in the future because they will assume the sole proprietor cannot do it.

Why might some sole proprietors have a difficult time taking vacation if they can set their hours to be whatever they want?

A sole proprietor may be the only employee of the business and if he or she left, the business would be closed.

Use the chart to classify advantages and disadvantages of sole proprietorship.

Advantages of Sole Proprietorships - few regulations - earns all profits - working for yourself - total control - easiest to start up and end - buying property - little legal paperwork - least expensive to start - government aid available Disadvantages to Sole Proprietorships - zoning laws - lots of paperwork - work more hours - sole responsibility - responsible for all debits - unlimited personal liability - limited access to resources

Maggie wants to name her artificial flower arrangement business using her name, "Maggie Lightner, Inc." Her friend Sally thinks she should name it "Forever Flower Designs." Think about the advantages of a sole proprietorship. Why might Maggie want to consider Sally's idea?

Maggie's idea of a name for a business describes her business and using just her name does not tell people what she does.

Why do you think zoning laws may prohibit some sole proprietorships from operating businesses out of their homes?

Some businesses might be disruptive to the residential area in which they are located.

Look at the circle graph that shows characteristics of a sole proprietorship. What amount do most sole proprietorships report on their taxes? What does this tell you about the size of most sole proprietorships?

Most sole proprietorships report less than $25,000 which is relatively small for a business.

How might someone with an entrepreneurial spirit be different from someone who has worked for a single company for many years?

People with entrepreneurial spirit are more willing to take risks than people who have worked at the same company for many years.

A sole proprietorship has the ability to set flexible business hours. Why is this an advantage over other types of businesses?

Sole proprietorships can adjust business hours to meet their personal needs.

Why do you think more than 7o percent of all businesses are organized as sole proprietorships?

There is only one owner that earns all of the firms profits to be the only one that controls the entire business is appealing to many people.