SOLE PROPRIETORSHIP CLASS NOTES I. INTRODUCTION I. STRUCTURE Briefly describe the legal structure of the sole proprietorship. -simple -sole proprietor owns the assets -sole proprietor is ultimate decision-maker -can be very complex II. FORMATION Explain how a sole proprietorship is formed. -simply start carrying on business III. LEGAL STATUS AND LIABILITY OF THE SOLE PROPRIETOR What is the legal status of the sole proprietorship? -no separate legal entity Who owns the assets used in the sole proprietorship business? -the sole proprietor –the “business”, by whatever name it is referred to, cannot own property because it is not recognized as a legal person capable of owning property Can the “business”, by whatever name it is referred to, be a party to a contract? -no because it is not a legal “person” and therefore can not be a party to a contract – it has no legal capacity to enter into a contract Who is liable in contract and tort for the activities of the sole proprietorship business? -the sole proprietor What assets could creditors seek in the enforcement of a judgment arising out of the conduct of the business of a sole proprietorship? -the assets of the business and the sole proprietor’s personal assets -and creditors of the sole proprietor in the sole proprietor’s non-business activities could claim against both the sole proprietor’s personal assets and the business assets IV. NAME What are the elements of the statutory requirement to register the business name under s. 88 of the Partnership Act? (i) -in the business of trading, manufacturing or mining; (ii) -not in partnership; (iii) -the business name is not the sole proprietor’s name or the business name consists of a phrase indicating a plurality of persons What purposes might the registry arguably serve? -credit check -identifying sole proprietor for the purposes of starting an action -avoid deception caused by name suggesting plurality of persons -avoiding passing off V. FUNDING How are sole proprietorships typically funded? -investment of sole proprietor -trade credit -loans VI. MANAGEMENT Who controls the business decisions in a sole proprietorship? -sole proprietor -often major creditors impose limitations on the conduct of the business VII. DISSOLUTION How does one dissolve a sole proprietorship? -stop carrying on the business VIII. WHY THIS FORM Explain why one might choose operate as a sole proprietor rather than through other forms of business association?
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