Question #2 Sole Proprietorship (6 marks)

Background Information Charles was a carpenter with a large homebuilder in Toronto.He is married to a teacher and has two teenage children.Charles and his wife own their own home that is registered jointly in their names and each owns a car.They also have a joint bank account and Canada Savings Bonds that are registered in both their names.Last year, he quit his fulltime job, got a parttime job at the Home Depot and started a home renovation business as a sole proprietor that he operates under the name The Reliable Renovation Company.Although he lost money in his first year, Charles intends to eventually expand into the home construction business and hopefully leave a thriving business to his children.

Assignment Question: (2 marks each)

1. What would Charles have to do to establish his sole proprietorship?

2. What are the advantages to Charles of operating this business as a sole proprietorship?

3. What are the disadvantages of operating this business as a sole proprietorship? What can Charles do to reduce these disadvantages?