The sole proprietorship is the simplest business form under which a single person can operate a business with a brand name. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts and day to day affairs. A sole proprietorship can operate under the name of its owner.
The sole proprietorship is getting popular because of its simplicity and nominal cost. A sole proprietor need only to register his or her name and secure local licenses, and the sole proprietor is ready for business.
Advantages of Proprietorship:
1. It can be established instantly and easily.
2. Sole proprietor owners can, and often do, commingle personal and business property and funds, something that partnerships, LLPs and corporations cannot do.
3. Sole proprietors need not observe formalities such as voting and meetings associated with the more complex business forms.
Disadvantages of Proprietorship:
1. The owner of a sole proprietorship remains personally liable for all the business’s debts. So, if a sole proprietor business runs into financial trouble, creditors can bring lawsuits against the business owner.
2. The owner of a sole proprietorship typically signs contracts in his or her own name, because the sole proprietorship has no separate identity under the law.
3. Owners cannot raise capital by selling an interest in the business.
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