Sole Proprietorship


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Sole Proprietor

The sole proprietorship is usually defined as a business that is owned and operated by one person. This is the most widespread form of small business organization. In order to establish a sole proprietorship, you only need to obtain whatever licenses you need and begin operation.

ADVANTAGES OF SOLE PROPRIETORSHIP

	Ease of Formation. There is less formality and fewer legal restrictions associated with establishing a sole proprietorship. It needs little or no governmental approval and is usually less expensive than a partnership or corporation.
	Sole ownership of profits. The proprietor is not required to share profits with anyone.
	Control and decision making vested in one owner. There are no co-owners or partners to consult.
	Flexibility. Management is able to respond quickly to business needs in the form of day to day management decisions as governed by various laws and good sense.
	Relative freedom from government control and special taxation.

DISADVANTAGES OF THE SOLE PROPRIETOR

Unlimited liability.
The individual proprietor is responsible for the full amount of business debts which may exceed the proprietor's total investment. This liability extends to all the proprietor's assets, such as house and car. Additional problems of liability, such as physical loss or personal injury, may be lessened by obtaining proper insurance coverage.

	Unstable Business Life. The enterprise may be crippled or terminated upon illness or death of the owner.
	Less available capital, ordinarily, than in other types of business organizations.
	Relative difficulty in obtaining long-term financing.
	Relatively limited viewpoint and experience. This is more often the case with now owner than with several.

NOTE: A small business owner might select the sole proprietorship to begin with and later, if the owner feels the need, change over to a partnership or corporation.


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