North Carolina Sole Proprietorship Basics

A North Carolina sole proprietorship begins automatically when a single individual or a husband and wife decide to start a business. Sole proprietors in North Carolina have complete control over every aspect of the company’s business activities. The fact that the owner of a sole proprietorship in North Carolina has unlimited liability for company debts and obligations is one of the downsides of this type of business.

Formation

A sole proprietorship is the easiest type of business structure to form and operate in North Carolina. There are no formal documents to file with the state to begin the legal existence of a sole proprietorship in North Carolina. This means the company is relatively inexpensive to establish as opposed to the fee required to form a corporation or a limited liability company in North Carolina. The owner of the business may use his legal name for business purposes or register an assumed business name with the county register of deeds where the company is located. The cost to register an assumed business name varies depending on the county where the North Carolina sole proprietor operates.

Liability

North Carolina sole proprietors have a personal obligation to pay all company debts and obligations that arise while operating the business. Sole proprietors in North Carolina have a legal tie to the business and have no separation from the company. This means that a business creditor can pursue an owner’s personal assets if the company’s assets are insufficient to cover the obligation. In addition, a creditor may pursue assets from the business as compensation for a North Carolina sole proprietor’s personal liabilities and debts.

Control

A sole proprietor in North Carolina has the autonomy to run the company in any way she sees fit. She can allocate company resources in any manner and has no other partners or owners that share in company profits. The business owner may take money from the business to pay personal obligations because a North Carolina sole proprietor does not have to separate business income from personal income. The owner does not have to confer with others to make decisions for the business. This allows the owner to react swiftly to changes in the business environment, whereas corporations must hold meetings among shareholders and directors to make important business decisions.

Considerations

Ownership of a North Carolina sole proprietorship lacks continuity. This means that the company will terminate automatically if an owner dies or decides to sell the business. When the owner takes on a partner, the sole proprietorship ends and a new business entity forms. A sole proprietor in North Carolina may have trouble raising capital. Lenders may be leery of extending a loan to a sole proprietor in North Carolina because the loan may default if the owner dies or becomes disabled.

References

• Entrepreneur: Small Business Encyclopedia -- Sole Proprietorship
• Johnston Community College: Small Business Guide -- Step Two: Sole Proprietorship
• Citizen Media Law Project: Becoming a Sole Proprietorship in North Carolina
• SBA.gov: Register Your Fictitious or "Doing Business As" (DBA) Name
• SBTDC; Business Start-Up & Resource Guide: Starting a Business in North Carolina; 2009

Resources

• Business Link North Carolina: Business Forms