Overview of Sole Proprietorship
A sole proprietorship is owned and run by only one person. The sole trader receives all profits and has unlimited responsibility for all losses and debts. Every asset of the business is owned by the proprietor, and all debts of the business are those of the proprietor. A sole proprietorship is the simplest business structure. There’s no legal separation between a business owner and their business entity. This structure may be best for small businesses just starting out.
Characteristics of a Sole Proprietor
A sole proprietor is an individual who owns an unincorporated business that is not registered as a corporation or limited liability company. It is the simplest form of business structure, and one person serves as both the owner and the operator of the business. A sole proprietor has complete control over all aspects of their business, such as decision-making and profit distribution, and is responsible for any debts or legal action taken against the business.
Advantages and Considerations of Sole Proprietorship
A sole proprietorship is an unincorporated business with only one owner who pays personal income tax on profits earned. Sole proprietorships are easy to establish and dismantle due to a lack of government involvement, making them popular with small business owners and contractors. As a sole proprietor, you’ll report your business income and expenses on the Schedule C form of your personal income tax return.