Sole Proprietorship

The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts. A sole proprietorship can operate under the name of its owner or it can do business under a fictitious name, such as Nancy's Nail Salon. The fictitious name is simply a trade name--it does not create a legal entity separate from the sole proprietor owner.

 Advantages of sole trading include that:

    you’re the boss
    you keep all the profits
    start-up costs are low
    you have maximum privacy
    establishing and operating your business is simple
    it’s easy to change your legal structure later if circumstances change
    you can easily wind up your business.


Disadvantages of sole trading include that:

    you have unlimited liability for debts as there’s no legal distinction between private and business assets
    your capacity to raise capital is limited
    all the responsibility for making day-to-day business decisions is yours
    retaining high-calibre employees can be difficult
    it can be hard to take holidays
    you’re taxed as a single person
    the life of the business is limited.