Sole proprietorship

A sole proprietorship is a form of business organization. It is the simplest form of business to start, but in many ways, the most risky.

A sole proprietorship essentially means a person does business in their own name and there is only one owner. Since the business is really just an extension of that person and not a new entity (like a corporation) any business debts are also personal debts. If the business were to get a judgement filed against it, it would be a problem for the owner. As a sole proprietorship is not a corporation, it does not pay corporate taxes, but rather the person who organized the business pays personal income taxes on the profits made, making accounting much simpler. A sole proprietorship need not worry about double taxation like a corporation would have to.

A business organized as a sole proprietorship will likely have a hard time raising capital since shares of the business cannot be sold, and there is a smaller sense of legitimacy relative to a business organized as a corporation or LLC. Hiring employees may also be difficult. This form of business will have unlimited liability, therefore, if the business is sued, it is the proprietor's problem.

Most sole proprietors will register a trade name or "Doing Business As" with their jurisdiction. This allows the proprietor to do business with a name other than their legal name and also allows them to open a business account with banking institutions. However, it should be noted that the owner is still personally liable for all business debts.

See also: