Sole Proprietorship
The sole proprietor is an unincorporated business with one owner who pays personal income tax on profits from the business. With little government regulation, they are the simplest business to set up or take apart, making them popular among individual self-contractors or business owners.
Many sole proprietors do business under their own names because creating a separate business or trade name isn't necessary.
Sole proprietorship is also known as "proprietorship".
There is no separate legal entity created by a sole proprietorship, unlike corporations and limited partnerships. Consequently, the sole proprietor is not safe from liabilities incurred by the entity. The debts of the sole proprietorship are also the debts of the owner. However, all profits flow directly to the owner of a sole proprietorship.
The benefit of the sole proprietorship is the tax advantage. The disadvantage of a sole proprietorship is obtaining capital funding, specifically through established channels, such as equity (selling shares) and obtaining bank loans or lines of credit. As a business grows it often transitions to a limited liability company (LLC) or S Corporation.
Ease of Formation
Prospective business owners need not file any special forms with state, local or federal agencies to start a sole proprietorship. When registering the new business, as is necessary for all new businesses, the owner must state that he plans to run a sole proprietorship. This requires no special fees. Some states require the owner register a DBA--doing business as--document with the office of secretary of state. Control
Sole proprietors have full discretionary control over operations and business decisions. They decide when to hire employees, what to pay them about minimum wage and when to let them go. The business owner controls all financial decisions associated with the business and receives all of the business profit. He decides how or if to save or reinvest the money. The owner can choose to
Many sole proprietors do business under their own names because creating a separate business or trade name isn't necessary.
Sole proprietorship is also known as "proprietorship".
There is no separate legal entity created by a sole proprietorship, unlike corporations and limited partnerships. Consequently, the sole proprietor is not safe from liabilities incurred by the entity. The debts of the sole proprietorship are also the debts of the owner. However, all profits flow directly to the owner of a sole proprietorship.
The benefit of the sole proprietorship is the tax advantage. The disadvantage of a sole proprietorship is obtaining capital funding, specifically through established channels, such as equity (selling shares) and obtaining bank loans or lines of credit. As a business grows it often transitions to a limited liability company (LLC) or S Corporation.
Ease of Formation
Prospective business owners need not file any special forms with state, local or federal agencies to start a sole proprietorship. When registering the new business, as is necessary for all new businesses, the owner must state that he plans to run a sole proprietorship. This requires no special fees. Some states require the owner register a DBA--doing business as--document with the office of secretary of state. Control
Sole proprietors have full discretionary control over operations and business decisions. They decide when to hire employees, what to pay them about minimum wage and when to let them go. The business owner controls all financial decisions associated with the business and receives all of the business profit. He decides how or if to save or reinvest the money. The owner can choose to