Sole Proprietorship
A sole proprietorship is a business that is owned and usually operated by one person. It is the
oldest, simplest, and cheapest form of business ownership because there is no legal distinction
made between the owner and the business. Sole proprietorships are very popular, comprising 72 percent of all businesses
and nearly $1.3 trillion in total revenue. Sole proprietorships are common in a variety of
industries, but the typical sole proprietorship owns a small service or retail operation, such as a
dry cleaner, accounting services, insurance services, a roadside produce stand, a bakery, a repair
shop, a gift shop, painters, plumbers, electricians, and landscaping services. Clearly, the sole
proprietorship is the choice for most small businesses.
Sole Proprietorships: A Summary of Characteristics
Liability Taxes Advantages Disadvantages
Unlimited: owner is responsible for all the debts of the business.
No special taxes; owner pays taxes on profits; not subject to corporate taxes
Tax breaks
Owner retains all
profits
Easy to start and
dissolve
Flexibility of being
own boss
No need to disclose
business information
Pride of ownership
Owner absorbs all losses
Unlimited liability
Difficult to get financing
Management deficiencies
Lack of stability in case of
injury, death, or illness
Time demands
Difficult to hire and keep
highly motivated
employees