Sole Proprietorship
A sole proprietorship is a type of business where the owner is the same as the business. The owner can either use their name or create a business name (also known as a fictitious name). The materials, profits and bills all belong to the individual.
• Liability: One disadvantage to a sole proprietorship is the liability. Since the owner and the business are one in the same, the individual is personally liable for everything regarding the business. This unlimited liability means that if the amount the business can pay is less than any debts owed then creditors can go after the personal assets of the owner.
• Income taxes: The taxes within a sole proprietorship look no different than for an individual. Any income the business generates must be counted as the owner’s personal income. Unfortunately, personal income usually is taxed at the highest rate and a sole proprietor may have trouble trying to take advantage of any tax breaks or lower rates. However, there are many business tax deductions that can be used to write off against the personal income, so this is a plus.
• Longevity or continuity: A definite upside to this business type is the continuity of the organization. Since the business is legally the same as the owner, then the business can continue to operate as long as the owner chooses to operate it. The only thing that could affect this is if there are debts owed above the value or ability to pay and the business can no longer survive.
• Control: The owner has the ultimate control over the important decisions and the business as a whole. No other owners or partners can be brought into the business, so the sole proprietor has full control over decisions and operations of the business.
• Profit Retention: All of the profits made within the business are the owner’s profits. None of the money has to be shared or distributed out. The only money that would need to be paid out in a sole proprietorship is any money owed for...