Sole Proprietorships: Everything You Need to Know

By Kelly Spors
The Hartford Small Biz Ahead
Originally Published: December 7, 2022 | Updated: April 17, 2023

Before you start raising capital, you’ll need to make a key decision as a business owner. You’ll need to figure out which form of business will best serve you and your company. The majority of U.S. businesses—about three-quarters of them—choose a sole proprietorship.

Alternatives to a sole proprietorship include incorporating into an S corporation or a C corporation or forming a limited liability company (LLC). These other structures each provide their own unique attributes and benefits and will generally shield your personal assets from the business’s legal liability—something a sole proprietorship won’t do. That said, being a sole proprietor comes with its own advantages to consider.

Given today’s challenging economic climate with COVID-19, it’s important to weigh the pros and cons of all the business structures. Choosing the right business structure can affect your ability to find investors and attract customers. It also impacts how much you spend to run your business, how you pay taxes and how legally protected you are.

Read on to learn more about the ins and outs of being a sole proprietor.

What Is a Sole Proprietorship?

A lot of small businesses may ask, “What is a sole proprietorship?” The sole proprietorship definition is a business owned by one person where there’s no legal separation between the business and the owner. That means if the business gets sued, the owner can be held financially liable and may have to pay legal defense costs and settlement money using their personal assets.

At the same time, a sole proprietorship is by far the simplest type of business to start and operate. This is because you don’t have to jump through all the hoops that incorporation entails, such as filing paperwork annually with your state and complying with the procedural rules of incorporation.

Many business owners—especially solo entrepreneurs without employees—choose to remain sole proprietors and not incorporate because of the simplicity.

What Makes a Sole Proprietorship Unique?

There are several key traits that set sole proprietorships apart from other types of business structures…[MORE]

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To read the entire article by Kelly Spors at The Hartford Small Biz Ahead website, visit: Sole Proprietorships: Everything You Need to Know