A Business Attorney Near Me answers questions on what is a sole proprietor. A sole proprietor owns the business assets, operates the business and is treated as one with the business for tax purposes. The proprietor is personally liable for all of the contracts and activities of the business. All of the proprietor’s personal as well as the business assets are exposed to all personal and business liabilities as well as claims arising upon dissolution of marriage.
There are no formalities required for this form other than licensure, if any, imposed by governmental entities, and registration for the use of a fictitious name. Other than tax returns, there are generally no reporting requirements.
Due to the lack of separation of ownership from control and the lack of any limitation on liability for both actions and contracts, the transfer of all or a portion of the business raises questions about the potential contingent liabilities of the buyer for the personal and business obligations of the seller and for the seller raises potential contingent liability for the continued operation of the business by the buyer.
This is particularly true where the business is continued in the same name at the same location and where the name of the business includes the name of the proprietor. The business assets sold may be subject to the claims of a spouse or former spouse upon a claim for equitable distribution of marital property which may survive the dissolution of a marriage.
Financing of this form of business normally requires the use of all of the proprietor’s personal as well as business assets. Since the business and the proprietor as taxed as one, all profits are taxed whether they are held for use in the business or used for its operations. If someone other than the proprietor is brought into the business, whether a member of the family or an unrelated third party, as a partial owner or part owner, the business becomes a partnership even if no formal partnership agreement is ever spoken or written. All of the consequences of partnership then apply. For all of these reasons, frequently a business is started as a sole proprietorship, and later morphs into another form. Business Attorney Near Me!
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