Sole Proprietorships Chapter 3

Introduction The sole proprietor relies on his or her own finances, skills, and resources to conduct a business.

This business model offers several advantages over other types of business organizational schemes but also suffers from several distinct drawbacks.

Sole Proprietorship A sole proprietorship is the easiest type of business to create.

A sole proprietor is free of any other influence in deciding how to run his or her business. Sole proprietors must rely on their own financial resources to run their business.

Sole Proprietorship Because the sole proprietor is, in effect, the business, when he or she is unavailable, no commerce can be conducted.

Because there is no legal separation between a sole proprietor and the business, there is no impediment to using profits for personal reasons.

Sole Proprietorship Sole proprietors can “pass through” losses from their business to their personal income tax returns.

One of the biggest disadvantages for a sole proprietor is his or her unlimited liability.

A sole proprietor might lose all of his or her personal assets to satisfy a judgment.