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Forms of Business

Sole Proprietorship

Sole Proprietorships are by far the most prevalent type of business as they represent 73 percent of the businesses that exist today. Most sole proprietorships are run by one person and the rest employ and run on less than 8 employees except for a few businesses that employ more than 8. It is safe to say then that they are fairly small operations that are run using the capital that the owner has or can acquire and holds true to being solely the owner’s responsibility both in profitability and in debt.

Advantages of a sole proprietorship are many starting with how simple they are to start. The only legal matters to handle are that of acquiring permits or licensures as they apply to the type of business, as well as, obtaining any specific certificates pertaining to the name you wish the company to be known as if different than your name. Another advantage is that of being the sole decision maker. As sole proprietor you make all the decisions of how your operation is run. This is a good and bad thing because this means whether your business is profitable and you make a profit or unprofitable and you sustain losses you are the one who is held solely responsible. When it comes to taxation the sole proprietor and the individual are one and the same, that simply means they are taxed as one entity. One of the advantages associated with this form of taxation is that the businesses expenses can be deducted from your total profits thus lowering your total taxable income.

Disadvantages of a sole proprietorship start with the ability of the owner to obtain assets to run the business. This is solely on the owner to establish the needed assets the business will need to start and run on before a profit is reached. No one else may invest in a sole proprietorship otherwise it is not considered a sole proprietorship. Not only are sole proprietorships limited in assets, but also in most cases they are limited by the skills of the owner. The...