Sole
Proprietorship
The
sole proprietorship is perhaps the most common form of business
ownership. Conducting business as a sole proprietor has distinct
advantages and disadvantages. You should be aware of these
characteristics, as they can have a significant impact on
your business. Please note that brief references appear in
this article to corporations, another form of business ownership.
What
is a sole proprietorship?
A
sole proprietorship is an unincorporated business owned by
one person (hence, the term sole). The owner of a sole proprietorship
is known as a sole proprietor. If you conduct your business
through a corporation, your business will not be a sole proprietorship.
If you share ownership of your business with someone else,
including your spouse, your business will not be a sole proprietorship.
The
most important feature of a sole proprietorship is that the
law makes no distinction between you, the sole proprietor,
and your business. Virtually all the legal and tax consequences
associated with sole proprietorships flow from this essential
element.
As
a sole proprietor, you can conduct business under your own
name or under a trade name. For example, you are a cleaner.
You can conduct business under your own name, eg Mary Smith,
Cleaner. Or, I can conduct business under a trade name, such
as Shiny New Cleaner. In either case--whether you conduct
business under your own name or under a trade name--if you
are the sole owner of an unincorporated business, your business
will be a sole proprietorship, and you will be the sole proprietor.
A
sole proprietorship can hire any number of employees. Because
the law makes no distinction between you, the sole proprietor,
and the business, you are not considered an employee. Sole
proprietorships may also hire any number of independent contractors.
(The difference between employees and independent contractors
will be discussed in a future article.)
Whether
you have zero or 100 employees (or independent contractors)
makes no difference. If you are the sole owner, your business
will still be a sole proprietorship.
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