Sole Proprietorship

A sole proprietorship is thought of as the quickest and easiest way to set up a business operation. There are no blanket prerequisites, nor are there any specific costs in starting a sole proprietorship.  The most marked characteristic of a sole proprietorship is that it is not a separate legal entity from its owner (you). All of the advantages and disadvantages of this business organization stem from that fact.

Advantages

The sole proprietorship is considered the quickest and easiest way to set up a business operation.  Few statutes deal with its organization or operation, and those that do apply to all business entities.  In contrast, there are many legal requirements associated with partnerships and corporations.  A sole proprietorship gives you the opportunity to own your own business without the formalities and costs of the other business organizations; you alone have control and responsibility for the operation.

Disadvantages

The biggest problem with a sole proprietorship is that your business assets and liabilities are not separate from your personal ones.  This means that you are fully liable for any debts or other legal responsibilities of your business, your personal savings and assets will be utilized to satisfy your creditors if necessary.  Insurance (an expense in itself) can limit your personal exposure, but it cannot protect you from creditors and some other types of liability claims. Protection against personal liability is a main reason why business owners choose to operate in a limited liability business format.  Additionally, since other business organizations are separate legal entities from their creator(s), they can exist beyond the lives or involvement of their original owners.

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