Sole Proprietorship

Sole Proprietorship

A business consisting of a single owner. The business is not necessarily formally organized and/or registered with the state.


Overview

Main Guide: Starting a Business.

A business consisting of a single owner. The business is not necessarily formally organized and/or registered with the state.


Related Services

Startup Basic

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The Startup Package consists of legal advice and services to help you with the basic setup of your business, including the creation of a corporate entity and allocation of shares to the founders.


Taxes

Main Guide:taxes

In a sole proprietorship, the owner reports their personal income and the income/loss of the business on a single tax return.


Pros & Cons of Sole Proprietorship

Pros:

  • Easy Formation. There are few restrictions and few forms to fill out.
  • No filing requirement with the state. You need only file with your local city or county clerk’s office.
  • Control of profits.
  • Control of decision making. As the sole owner, you make all decisions about business operations.
  • Flexibility. Because you are the management of the business, you can respond quickly to day-to-day problems.
  • Less government control & taxation.
  • Simpler Taxes. You don't have to file a separate tax return for the business and also do not have to prepare a balance sheet for the business.

Cons:

  • Unlimited Liability. The owner is personally liable for all the businesses debts and liabilities. The owner's personal assets, including their house and car, may be used to pay these liabilities.
  • Health of business = health of owner. The death, physical impairment, or mental incapacitation of the business owner can result in the termination of the business.
  • Difficulty raising capital and financing. Most large financial institutions will require the business to be incorporated as either an LLC or corporation.
  • Less professional. A sole proprietorship appears less professional than a partnership, and certainly less professional than a corporation.