A sole proprietorship is an unincorporated business owned by one individual.
How Does a Sole Proprietorship Work?
In a sole proprietorship, there is no legal separation between the business and the owner. In other words, the business is considered an extension of the owner and therefore, the owner is personally responsible for any debts or liabilities incurred by the business.
What are Some of the Benefits of a Sole Proprietorship?
- It is easy to set up and operate.
- You own 100% of your business and make all decisions.
- There are no corporate formalities.
Are there any Disadvantages?
- Since there is no legal separation between you and your business, your personal assets can be seized to satisfy any liabilities your business incurs.
- Some businesses and government agencies will not work with unincorporated businesses.
- It may be hard to sell your business because a proper valuation may be difficult to achieve given that there is no distinction between the assets of the owner and the business’ assets.
Is a Sole Proprietorship Right for You?
A sole proprietorship is one of the most popular forms of business ownership simply because it is the easiest and least expensive type of business to set up and operate. However, if your business activities could expose you to substantial liability, a sole proprietorship may not best for you.
Questions on Sole Proprietorship? Melody Cobbe is happy to help navigate the advantages and disadvantages of a Sole Proprietorship.
Cobbe Law is dedicated to helping start-ups and small businesses maximize profitability while minimizing legal exposure. Melody, the owner of Cobbe Law, is passionate about supporting entrepreneurs and small businesses through business growth and providing big vision strategies. She’s received an AV rating by Martindale Hubble, been consistently recognized by the South Florida Legal Guide and Florida Super Lawyers, and has been given a superb rating by Avvo. Melody is also an avid participating member in community organizations such as the Junior League of Boca Raton and FemCity.