This is the simplest form of business entity. With a sole proprietorship, one person is responsible for all a company’s profits and debts.
“If you want to be your own boss and run a business from home without a physical storefront, a sole proprietorship allows you to be in complete control,” said Deborah Sweeney, CEO of MyCorporation. “This entity does not offer the separation or protection of personal and professional assets, which could prove to become an issue later on as your business grows and more aspects hold you liable.”
Proprietorship costs vary, depending on which market your business is part of. Generally, your early expenses will consist of state and federal fees, taxes, equipment needs, office space, banking fees, and any professional services your business decides to contract. Some examples of these businesses are freelance writers, tutors, bookkeepers, cleaning service providers and babysitters.
Here are some of the advantages of this business structure:
Easy setup. A sole proprietorship is the simplest legal structure to set up. If your business is owned by you and only you, this might be the best structure for your business. There is very little paperwork since you have no partners or executive boards to answer to.
Low cost. Costs vary depending on which state you live in, but, generally, the only fees associated with a proprietorship are license fees and business taxes.
Tax deduction. Since you and your business are a single entity, you may be eligible for certain business tax deductions, such as a health insurance deduction.
Easy exit. Forming the proprietorship is easy and so is exiting one. As a single owner, you can dissolve your business at any time with no formal paperwork required. For example, if you start a daycare center and wish to fold the business, you can simply refrain from operating the daycare and advertising your services.
Examples of sole proprietorships:
The sole proprietorship is one of the most common small business legal structures. Many popular companies started as sole proprietorships and eventually grew into multi-million dollar businesses. A few examples include:
- JC Penny
- Marriott Hotels