What is a Sole Proprietor?

The vast majority of home businesses fall under "Sole Proprietor". This is an unincorporated business owned by only one person. If you share ownership with anyone else, even if that person is your spouse or other relative, your business will not be one of a sole proprietor.

When you run your business as a sole proprietor, you can conduct all your business under your own personal name, or under a trade business name. If you are running a pet sitting business, you can run your company under your personal name of Jane Doe, Dog Sitter. Or you can use a business name such as Perfectly Precious Pet Sitting.

From a legal and tax point of view, there is no difference between you and your business. You are the sole person making business decisions, thus the sole person responsible for your business. This means if your business goes bankrupt, that creditors can come after your personal assets, such as house, vehicle or any other possessions you own which are considered to have value. But if you are applying for a business loan, chances are that you would be using any of those things for your collateral.

As a sole proprietor, you don't have to answer to anyone to make your regular business decisions. You do not have to consult with others in a partnership, you do not need approval of a board of directors to make major business decisions, and you don't have to consider the needs and happiness of any company shareholders.

Sole proprietorships are quite easy to set up, which is why the majority of home businesses are run as a sole proprietorship. They are also the least expensive and least complicated to set up.

When you are a sole proprietor, you can hire employees or independent contractors. Hiring or contracting people does not change the status of your business as a sole proprietorship.

If you plan to get financing for your business, it can be more difficult to do so as a sole proprietorship. Banks and other financial institutions often balk to provide financing since you are the sole person responsible for the success or failure of your business, and hence the sole person responsible and liable for paying back the business loan.

In short, a sole proprietorship means you and your business are considered one entity. Your business debts are considered your personal debts. But your business profit and income are also considered your personal profit and income.

About Us | Contact Us | Submission Guidelines |Privacy policy
Copyright 2001-2012