Sole Proprietorship is the most common form of business. In a sole proprietorship, only one individual runs the business. It is the easiest to set up, with the least amount of paperwork. Usually all you need to do is register with your state government by purchasing a business license. The most significant downside of operating a sole proprietorship is that you are responsible for all the debts your small business may face. Unlike a corporation, in a sole-proprietorship structure the law views you and your business as one. This means the financial debts of your small business is considered your financial debts. For example if someone decides to sue your business and there’s not enough money in your business to cover the costs, your own money and assets (such as your house) are in jeopardy. A good small business insurance policy can reduce lawsuit worries but make sure you have a thorough understanding of what your insurance policy covers.
- You have full control over your business- You are your own boss!
- Easiest and least expensive to set up
- Less paperwork to get started than corporations
- You can receive tax breaks for some of your business expenses such as a home office and travel (If the purpose of travel was for business of course)
- You are fully responsible for your business debts. If something goes wrong with your business, you will have to pay.
- It is often more difficult to raise money for a sole proprietorship
- Selling a small business can be more complicated than selling a corporation since the business assets are involved.
- After you pass away your small business will probably soon follow