Sole Partnership

A sole proprietorship is the simplest and most common structure available for a business. It is an unincorporated business owned and operated by one individual with no distinction between the business and you, the owner. You are entitled to all profits and are responsible for all your business’s debts, losses, and liabilities.

• How to form a sole partnership:

  • No formal action is required as long as you are the only owner.

  • Depending on industry, state, and locality regulations, licenses and permits may be required.

  • If you choose to operate under a name different than your own, you will most likely have to file a fictitious name (also known as an assumed name, trade name, or doing business as (DBA)).

  • You must choose an original name; it cannot already be claimed by another business.

• Positive attributes:

  • Easy and inexpensive to form. A sole proprietorship is the simplest and least expensive business structure to establish.

  • Complete control. Because you are the sole owner of the business, you have complete control over all decisions.

  • Easy tax preparation. Your business is not taxed separately, so it’s easy to fulfill the tax reporting requirements for a sole proprietorship. The tax rates are also the lowest of the business structures.

• Negative attributes:

  • Unlimited personal liability. Because there is no legal separation between you and your business, you can be held personally liable for the debts and obligations of the business. This risk extends to any liabilities incurred as a result of employee actions, such as law suits.

  • Hard to raise money. Because you can’t sell stock in the business, investors won't often invest. Banks are also hesitant to lend to a sole proprietorship because of a perceived lack of credibility when it comes to repayment if thebusiness fails.