Write a letter advising a hypothetical sole proprietor to choose another form of

Question

Write a letter advising a hypothetical sole proprietor to choose another form of business ownership. By definition, a sole proprietorship is an unincorporated business owned by one person known as the sole proprietor. The majority of U.S. businesses are owned and operated as sole proprietorships. In a persuasive paragraph, write a letter to a hypothetical sole proprietor explaining why he or she should convert the sole proprietorship to another form of business ownership (for example, a traditional "C" corporation, an "S" corporation, or a limited liability company).

Explanation / Answer

Defination of Sole Proprietor- A sole proprietorship is the simplest and most common structure chosen to start a Small Venture Business. It is an unincorporated Business Owned and Runned by one individual person only. Sole Proprietor is the only person who is entitled to all profits and losses of an Organization.

In a Hypothetical Situation when a Sole Proprietorship Business inccuring Losses in his/her Business it is always advisable to change Management due to situation of

1.) Unilimited Liability- Since Sole Proprietor is whole and sole responsible for his Profits and Losses so due to Unlimilted Liability of Business it becomes difficult to run a Business on 1 shoulders only

2.) Time Consuming to generate Revenue for an Organization- Since Proprietor single handed cannot make an expansion of Business on a large scale basis . So in Small Business it does take lot of time to generate revenue

Change a Business from Sole Propietorship to LLC-

Steps involved in changing your Business-

1.) Register with Local and State Agencies- In order to convert a Sole Proprietorship to a Limited Liability Corporation ( LLC), it is very important to file a DBA 'Fictitious Name' registeration with government agency. In order to convert a LLC or corporation, you must file the articles of incorporation and other paperwork with your state government office.

2.) Register with the IRS- Need to make an Application for a new Employer Identification Number (EIN). If you convert to a corporation, you must file for a new EIN, unless you elect to file as an S-Corporation. Corporations converting from sole proprietorships to partnerships should apply for a new EIN. Use this checklist from IRS.gov to determine if you need a new EIN.

3.) Reapply for Licenses- Some States require you to reapply for licenses when your business structure changes

4.) Intimate Bank Officials- Intimate Bank and Insurance Company for registering paticular changes. Bankers may require you to transfer assets. Apart from Bankers have a word with Suppliers, Purchasers regarding change of Management.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.