One of the easiest business structures to work with is a sole proprietorship. With this form, you are the only person running the business. There is no legal distinction between you and your business
While this is the easiest kind of structure to set up, there are some downsides. Sole proprietorships:
- Have unlimited personal liability. That means that if someone wants to sue you, or if you go into debt, then you are personally responsible for that. There is no legal difference between yourself and your business, which puts your personal assets at risk.
- Are burdensome. In some ways, being a sole proprietor is more burdensome than running a business of a different type. Why? You’re the one who is solely responsible for the business. You’re the one who will celebrate successes or suffer from failures.
- Have more trouble raising money. You won’t be able to sell stock, and banks may not want to loan to you because of perceived risk. As a result, it may be hard for you to get a business loan.
That doesn’t mean that a sole proprietorship doesn’t have benefits, because it does. A sole proprietorship:
- Has simpler taxes. You fill out all the tax information with your normal tax return each year.
- Gives you complete control. As the owner, you make all the decisions and don’t have to consider anyone else’s opinions.
- Is simple to form and inexpensive to start. The cost to set up this form of business structure is very low, making it easier for people with little capital.
If you want to consider a sole proprietorship, you may want to discuss your options with your attorney. There could be better options, depending on the liability that you would be exposed to in your business.