A sole proprietorship, or simply proprietorship, is a type of business entity which legally has

no separate existence from its owner. Hence, the limitations of liability enjoyed by a corporation
and limited liability partnerships do not apply to sole proprietors. All debts of the business are
debts of the owner. It is a "sole" proprietor in the sense that the owner has no partners. A sole
proprietorship essentially means a person does business in their own name and there is only one
owner. A sole proprietorship is not a corporation; it does not pay corporate taxes, but rather the
person who organized the business pays personal income taxes on the profits made, making
accounting much simpler. A sole proprietorship need not worry about double taxation like a
corporate entity would have to.

Most sole proprietors will register a trade name or "Doing Business As". This allows the
proprietor to do business with a name other than his or her legal name and also allows the
proprietor to open a business account with banking institutions.

[edit] Advantages

An entrepreneur may opt for the sole proprietorship legal structure because no additional work
must be done to start the business. In most cases, there are no legal formalities to forming or
dissolving a business. A sole proprietor is not separate from the individual; what the business
makes, so does the individual. At the same time, all of the individual's non-protected assets (e.g
homestead or qualified retirement accounts) are at risk. There is not necessarily better control or
business administration possible with a sole proprietorship, only increased risks. For example, a
single member, member managed LLC still only has one owner, who can make decisions quickly
without having to consult others, but has the advantage of limited liability.

Furthermore, in many jurisdictions, a sole proprietorship files simpler tax returns to report its
business activity. In the United States, for example, a sole proprietorship reports its income and
deductions on a Schedule C on the individual's personal return. To the IRS, a single member
LLC is treated as a disregarded entity, and thereby, the owner of a single member LLC will still
report income and deductions on a Schedule C on their individual . In comparison, an identical
small business operating as an S Corporation or partnership would be required to prepare and
submit a separate tax return. As with all flow through entities, all of the profits and losses from
the business go right to the owner. A sole proprietorship often has the advantage of the least
government regulations.

[edit] Disadvantages

A business organized as a trader will likely have a hard time raising capital since shares of the
business cannot be sold, and there is a smaller sense of legitimacy relative to a business
organized as a corporation or limited liability company. It can also sometimes be more difficult
to raise bank finance, as sole proprietorships cannot grant a floating charge which in many
jurisdictions is a sine qua non of bank financing. Hiring employees may also be difficult. This
form of business will have unlimited liability, therefore, if the business is sued, the proprietor is
personally liable. The life span of the business is also uncertain. As soon as the owner decides
not to have the business anymore, or the owner dies, the business ceases to exist.
In countries without a National Health Service, such as United States, a sole proprietor is also
responsible for his or her own health insurance, and may find difficulty finding any if one of the
family members to be covered has a previous health issue. Another disadvantage of a sole
proprietorship is that as a business becomes successful, the risks accompanying the business tend
to grow. To minimize those risks, a sole proprietor has the option of forming a limited liability
company, or LLC. Note that such an LLC would still be treated as a sole proprietorship for
income tax accounting purposes.