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Test Question 1: When organizing a business there are various points to consider when dealing with the liability and tax consequences. Sole proprietorships are businesses owned and operated by one individual. If a person sets up a business as a sole proprietorship it is considered an extension of yourself. Therefore, as a sole proprietor, the business assumes personal responsible for all liabilities and debts the business incurs. Sole proprietors are not required to file for a state or city license to do business and they will file a regular 1040 or 2106 return (highest tax rate). However, in the event they are sued (ex: purple-headed lady crossing the street and their delivery guy hits her in a company van) they can lose everything because liability is high and they will be personally responsible for damages. A general partnership is much like a marriage arrangement; two or more people form a company and the owners are "jointly and severally" liable for debts and any legal actions......

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Approximate Word Count: 1373
Approximate Pages: 6 (250 words per double-spaced page)

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