Sole Proprietorships

The Advantages and Disadvantages to Being a Sole Proprietor

Sole proprietorships are a common way that many new small businesses start out. The business consists of one owner, the sole proprietor. In many cases, the sole proprietor wears all the hats – marketing, sales, accounting, etc.

In a sole proprietorship all the assets and profits of the business are owned by the sole proprietor. And, the sole proprietor is also responsible for all the debts and liabilities of the business. Legally, the sole proprietor and the business are the same.

Advantages of a Sole Proprietorship

• Setting up a sole proprietorship is east and other than applicable business licensing fees, may cost nothing.
• Sole proprietors receive all income generated by the business to keep or reinvest.
• Profits from the business flow directly to the sole proprietor’s personal tax return.
• It’s easy to dissolve a sole proprietorship.

Disadvantages of a Sole Proprietorship

• Sole proprietors are not personally protected from any debts and liabilities of the business.
• Sole proprietorships have a hard time raising money from investors as there is no structure to invest in.

Learn more about other business entities in general or these entities in particular: S corporations, C Corporations, LLCs.

Click here to learn the differences between S corporations and LLCs.

View a chart that compares C corporations, S corporations and LLCs