Tag Archives | debt obligations

Sole Proprietorship

Sole Proprietorship Definition

The sole proprietorship definition is a private business owned and operated by one individual. Furthermore, a proprietorship is unincorporated and is not a legal entity separate from its owner. As a result, the owner earns all of the profits and incurs all of the losses from business operations. Therefore, the sole proprietor is legally liable for all of the activities and obligations of the business. For example, if the proprietorship defaults on debt obligations, the owner risks liquidation of personal assets.

Advantages and Disadvantages of a Sole Proprietorship

There are several advantages to the sole proprietorship. Proprietorships are easy to establish, easy to dissolve, and they give the owner a significant amount of operational freedom and flexibility. For tax purposes, the owner simply includes the profits or losses of the proprietorship with his or her individual tax filings.

There are also disadvantages. The owner has unlimited liability for the activities and obligations of the proprietorship. This puts the owner’s personal assets at risk. Also, because of the small scale of a proprietorship, it can be difficult to gain access to substantial capital resources and financing. As a result, this limits the growth potential of the enterprise.


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sole proprietorship

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sole proprietorship

See Also:
Partnership
General Partnership
Limited Partnership
S Corporation
How to Run an Effective Meeting

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Debtor in Possession

Debtor in Possession

A debtor in possession, or DIP, is a company undergoing a Chapter 11 bankruptcy reorganization. In Chapter 11 bankruptcy, the debtor remains in possession of its assets and continues normal business operations while reorganizing debt obligations and repayment plans. This is in contrast to a Chapter 7 liquidation, in which the debtor’s assets are sold to pay off debts and the bankrupt company ceases operations. In some cases, debtor-in-possession may refer to a legally appointed trustee, someone other than the actual company that is in bankruptcy, who oversees the assets during the reorganization.

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debtor in possession
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debtor in possession

See Also:
Chapter 11 Bankruptcy
Chapter 12 Bankruptcy
Bankruptcy Costs
Bankruptcy Courts
Chapter 13 Bankruptcy
Bankruptcy Code
Bankruptcy Information
Secrets of Successful Out of Court Debt Restructures
Tips on How to Manage your Lawyer
Relationship With Your Lender

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