Me, Myself and Mine - Sole Proprietorships

The most basic way of doing business is as a sole proprietor. This means you do business in your own name, and you are the sole owner of the assets and sole person responsible for the liabilities of the business. The key advantage of a sole proprietorship is its simplicity. You don't have to file any forms with anyone, you use your social security number for taxation and financial identification purposes, and you're not subject to any financial reporting obligations except to the taxing authorities of your state and federal government.

The downside of a sole proprietorship is that you are personally responsible for the debts of the company, and the only way you are able to raise investment money is by borrowing it. If you have a catastrophic business loss, you will probably have to go personally bankrupt in order to get rid of the liability. Nevertheless, many start-up companies begin as sole proprietorships, and it is easy to spin the assets of a successful sole proprietorship into another type of business entity. If you are already operating your business as a successful sole proprietorship, there is no reason to think that you must immediately jump into incorporation. But read on, and you will make the choice.


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