Sole proprietorships are one of the simplest and most common forms of business ownership. Below is an overview of the key attributes, responsibilities, and the growth potential of a sole proprietorship.
Key Attributes and Responsibilities
- A sole proprietorship is owned and run by one person.
- The owner enjoys full control and responsibility for the business.
- Sole proprietorships are easy and inexpensive to form as they require minimal paperwork and permits.
- The owner contributes all capital and has rights to all profits.
- The owner also has unlimited personal liability for all losses and debts.
- The business can hire employees and independent contractors.
- Many small or freelance businesses operate as sole proprietorships.
- The business name can differ from the owner’s legal name.
- The owner can trademark the business name.
- The owner pays personal income tax on all business profits.
Growth Potential
- Sole proprietorships can transition into limited liability companies or corporations as they grow.