Sole Proprietorship
A sole proprietorship is the simplest form of
business ownership. Not surprisingly, the vast
majority of small businesses begin their existence
as sole proprietorships. A sole proprietorship has
but one owner
A sole proprietorship hasbut one owner. That sole owner may engage inany form of legal business activity any time andanywhere. Other than the various local and statebusiness licenses that every business must purchaseregardless of type of ownership, no legalformalities are required to start or operate thebusiness. The owner is responsible for securingand investing the funds for the business. Thesefunds may come from the owner’s existing or
borrowed financial resources. Advantages.
An owner of a sole proprietorship gets to keep all
profits derived from the operation but must also
bear all losses. The owner may even share any
portion of the profits and losses with another
person or persons.The owner has the authority to make all thedecisions relating to the business. Since there areno co-owners, there is no need to hold policymeetingsessions or form any group similar to aboard of directors. The owner, of course, must
bear the responsibilities that accrue from the decisionsmade.
The owner may hire employees or work with
independent consultants and still retain the sole
proprietorship form of ownership.
Disadvantages. Unlimited liability is the major disadvantageborne by the sole proprietorship. The owner isfinancially responsible for satisfying all businessdebts and/or losses suffered by the firm, even tothe point of sacrificing his or her personal or
other business interests to pay off any liabilities.
⠀ Maxwell, G. W. (2001). Sole proprietorship. In B. S. Kaliski (Ed.). Encyclopedia of Business and Finance, vol. 1.(pp. 783-786). Macmillan Reference USA (p. 783)