What is a sole proprietorship?

A sole proprietorship happens when an individual owns an unincorporated business by himself or herself. He or she is the only business owner, and all debts of the business are debts of the owner. There are no formal requirements to form or conduct business, the owner has unlimited liability, but taxes are paid by the individual.

What are the advantages of forming a sole proprietorship?

• You own it all

• You have total control

• You get all the profits

• It is easy to form

• It is easy to dissolve

• Simple tax situation

• No taxes on the business separately

• You may deduct business expenses on your personal gross income

What are the disadvantages of forming a sole proprietorship?

• You are personally responsible for all losses and debt

• It is difficult to get financing

• It is difficult to sell because the business is not separate from the individual

• Few tax advantages

• Dependent on the health and motivation of the owner

• All business profit is taxed as personal income, even if you do not take the money out for personal use

• You must pay additional self-employment taxes for Social Security Benefits