Advantages & Disadvantages of a Sole Proprietorship

Advantages & Disadvantages of a Sole Proprietorship thumbnail
Advantages & Disadvantages of a Sole Proprietorship

In a sole proprietorship the business has only one owner. The business also does not have a legal identity distinct from the owner, and is therefore considered a personal wealth investment.

  1. Owners

    • The owners of a sole proprietorship only have to answer to themselves, but the business will cease to be a legal entity if the owner dies or sells the business.

    Finances

    • A sole proprietorship has the ability to borrow funds, but that borrowing status is dependent on the owner's personal financial status.

    Liability

    • The owners are personally liable for any defaults or lawsuits, and their personal property can be taken away in the event of a lawsuit.

    Profit

    • Profits from a sole proprietorship are not taxed--they are considered as income on the owner's personal taxes.

    Start Up

    • A sole proprietorship is the easiest form of business to start, as there are virtually no legal formalities to complete.

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