Sole Proprietorship

A sole proprietorship is the least costly and easiest business structure to form for incorporating a small business. It is acceptable for small businesses where the owner and worker is the same person. A sole proprietorship can have other employees. However, there can only be one owner and that individual is legally responsible for the small business and for decisions made by the employees. A sole proprietorship can be activated by merely commencing to conduct business, and can function under the owner’s name. The owner and the small business are legally the same entity. The individual owns all the small business assets and simultaneously has unlimited personal responsibility for the business liabilities.

Creditors can pursue the small business assets as well as the owner’s personal possessions. In certain states, there is some protection for this if private property is jointly owned by the proprietor and his or her spouse or children. Ultimately, the owner is liable for any losses not covered by insurance. The sole proprietorship continues as long as the owner wishes to conduct business. It can be sold through the sale of all or a portion of the small business assets. When the proprietor dies, the business ceases to exist and any liabilities and assets become part of the owner’s estate. The business income is reported on the owner’s individual income tax return. A sole proprietorship is not eligible for small business loans. For help with questions about sole-proprietorships or incorporating a small business, please contact us.