What Are the Advantages of a Sole Proprietorship?

 Posted on April 15, 2020 in DuPage County Business Law Attorney

If you are considering starting a business, you have a number of important decisions in front of you. One of the most critical decisions you will ever make about your business is what type of business structure you should choose. Your business structure will determine how you pay your taxes, to what degree your personal assets are at risk, your day-to-day operations, and more. Some of the most common business structures include S-corporation, partnership, limited liability company, and sole proprietorship. Each structure has its own advantages and drawbacks and the types of structure you choose will be based on your needs and business goals. In this post, we will be discussing the benefits associated with a sole proprietorship.

What is a Sole Proprietorship?

In a sole proprietorship, there is no legal distinction between the business entity and the business owner. A sole proprietor is solely responsible for the ownership and management of his or her business and does not share ownership with other partners. A sole proprietor receives all of the business’s income but is also responsible for the business’s liabilities, debts, and taxes. The business assets are not separate from the owner’s personal assets as with many businesses.

Sole proprietorships are a popular choice for many new business owners because establishing a proprietorship is often more affordable and less complex than other types of business structures. As a proprietor, a business owner has full decision-making power over his company. Of course, with this power comes significant responsibility. If the company incurs debts, the owner may be held personally liable. A business is automatically considered a sole proprietorship if it is not registered as another type of business. If you start a business and do not register your business with the state, you must pay your business taxes as a sole proprietor. A sole proprietorship may be the right choice for you if you want to start a low-risk business or you want to test your business idea before establishing a more formal business structure. Once your business starts to grow, you may choose to restructure the business as a corporation or other business type in order to meet your evolving needs.

Contact a DuPage County Business Law Attorney

Choosing a business structure is not a decision to take lightly. To discuss what type of business structure is best for you entrepreneurial aspirations or for other business law-related concerns, contact Stock, Carlson & Asso. LLC. Call our office at 630-665-2500 today and set up a confidential consultation with a highly experienced Wheaton business lawyer.

Sources:

https://www.sba.gov/business-guide/launch-your-business/choose-business-structure

https://www.investopedia.com/terms/s/soleproprietorship.asp