What is a Sole Proprietorship?

What is a Sole Proprietorship?

A sole proprietorship is formed automatically when you start operating a business. We're breaking down the pro's + cons to running this type of company:


The Pros

There's no registration, operating requirements, paperwork, or fees.

It's an easy tax season. You'll report your income on your regular tax forms.


The Cons

There can only be 1 owner

You won't receive limited liability. This means your personal assets are considered company property, and they can be taken by business creditors. In the case of a lawsuit or an unpaid contract, you may have to pay with your personal assets, like your house, car, or bank account.

It's not a great option for signing "dream deals." Big accounts typically have policies that prohibit working with sole proprietorships for legal and insurance reasons.

It's not an option if you're looking for investors. They don't fund sole proprietorships because they can't receive equity in the business.


Your other entity options



C Corporations

S Corporations



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