What is a Sole Proprietorship

by Investing School on April 26, 2010

A sole proprietorship is one of the oldest and simplest legal structures you can enact to start and own your own business. A sole proprietorship is a one-person business operation and it is not registered with the state as either a corporation or a limited liability company or LLC. And, there is no legal distinction between the owner of the business and the business itself. A sole proprietor may choose to use his or her given name or may choose to use a trade name for his or her business.

Sole proprietorships are very easy to establish and maintain that many may already have one and they do not even know it! For example, if you are a freelance photographer, freelance writer, a craftsperson or someone who works on a contract basis and you are not on an employer’s regular payroll then you are automatically regarded as a sole proprietor.

Even though this system is one of the oldest and simplest structures does not mean you do not have to do anything. A sole proprietor may have to comply with local registration requirements, acquire a business license or a permit in order to make his or her business a legitimate enterprise.

A sole proprietor is solely responsible for any business-related obligations or debts incurred due to operating the business. This would mean that if your business fails to pay a supplier, loses a lawsuit, defaults on a loan then the creditor can automatically come to you to receive restitution.

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