Monday, December 21, 2009


the sole proprietor business blends the personal and business assets of the individual toward a business venture. the sole proprietor incurs unlimited liability (exposure of personal assets to business obligations), limited life, business and personal income/assets are viewed by taking authorities as one, and because of these risks, has considerable difficulty raising funds in financial markets.

it is one of the commmon forms of business entities in Indonesia. the forms and the characteristics of proprietorship are:
- most of business entities in Indonesia is proprietorship
- cost of organizing is low
- is limited to financial resources of the owner
- is used by small business

the most common type of proprietorships are proffesional service providers, such ass lawyers, architects, realtors and physicians.

a proprietorship is simple to form. for example, a person providing child-care services for friends of the family is a proprietor. there are no legal restrictions or forms to file in forming a proprietorship. the ease of forming a proprietorship is one of its main advantages. in addition, the individual owner can usually make business decisions without consulting others. this ability to be one's own boss is a major reason why many individuals organize their businesses as proprietorships.

a proprietorship is a separate entity for accounting purpose, and when the owner dies or retires, the proprietorship ceases to exist. for income tax purposes, however, the proprietorship is not treated as a separate taxable entity. the income or loss is said to "pass through" to the owner's individual income tax return. thus, the income from a proprietorship is taxed only at the individual level.

a primary disadvantage of a proprietorship is the difficulty in raising large amount of capital. investment in the business is limited to the amounts that the owner can provide from personal resources, plus any additional amounts that can be raised through borrowing. in addition, the owner is personally liable for any debts or legal claims against the business. in other words, if the business fails, creditors have rights to the personal assets of the owner, regardless of the amount of the owner's actual investment in the enterprise.

a variant of the regular partnership is a limited partnership. a limited partnership is a unique legal form that allows partners who are not involved in the operations of the partnership to retain limited liability. in such a form, at least one general partner must operate the partnership and retain unlimited liability. the remaining partners are considered limited partners.

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