Overview of Sole Proprietorship
A sole proprietorship is owned and run by one person. There is no legal distinction between the owner and the business. The proprietor receives all profits and has unlimited responsibility for all losses and debts. Every asset of the business is owned by the proprietor. The business is not a separate legal entity. In Malaysia, there are three laws governing the registration of sole proprietors.
Responsibilities of a Sole Proprietor
The owner makes most decisions in a sole proprietorship. The proprietor receives all profits and bears all losses. Proprietors are personally liable for business debts.
Examples and Advantages of Sole Proprietorship
The sole proprietorship is ideal for small businesses where owners want control. An independent artist who sells work to clients, freelancers, a freelance writer providing writing services, or a landscaping business owned and operated by an individual are common examples. Ease of formation and operation is an advantage.
Liability of Sole Proprietorship
Who is responsible for the liabilities of a sole proprietorship? Sole proprietors own and operate unincorporated businesses. They enjoy full control and all profits. However, owners have unlimited personal liability for all losses and debts.
Personal Responsibility of Owner in a Sole Proprietorship
What is the owner of a sole proprietorship personally responsible for? A sole proprietorship has no legal distinction between the business and owner. Assets belong to the proprietor who is liable for all obligations. Creditors can pursue owners’ personal assets to settle business debts.
Establishment and Operation of Sole Proprietorship
Sole proprietors handle establishing, directing and running the enterprise. They owe income tax on profits. The business and person are identical for legal and tax purposes. Even with a registered name, there is no separate entity. Simplicity attracts entrepreneurs. Jane owns a store in her hometown.