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Sole Proprietorships

  • There is only one owner of business
  • Business is not a separate entity apart from owner
  • Owner does not share power or decision making with other owners

Advantage over other business structures

  • Sole Proprietorship is simplest type of business structure
    • Easy to form and to operate
    • Federal or state governments do not require formal filing or approval to begin operation
      If business is operating under name other than that of sole proprietor, most states require that it file fictitious name statement with government.
  • Business can be sold without need to obtain approval from others such as shareholders or partners
  • Owner has right to make all business decisions such as direction company should go, who to hire or fire, etc.
  • If business generates profit, sole owner need not share it with other owners or investors
  • The profits of the business are taxed on the personal tax return of the owner–profits are taxed only once

Disadvantages over other business structures

  • If company has loss, sole proprietor suffers all of it
  • Sole proprietorship cannot obtain capital from partners, shareholders etc. Capital is limited by funds the owner has or can borrow
  • Sole proprietor has unlimited personal liability
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