Sole proprietorship

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A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business.

The owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts. Every asset of the business is owned by the proprietor and all debts of the business are the proprietor's. It is a "sole" proprietorship in contrast with partnerships. A sole proprietor may use a trade name or business name other than his or her legal name.

Advantages[edit]

He/She will be safe from fraud of the other partners.

Disadvantages[edit]

Raising capital for a proprietorship is more difficult because an unrelated investor has less peace of mind concerning the use and security of his or her investment and the investment is more difficult to formalize;[1] other types of business entities have more documentation. The enterprise may be crippled or terminated if the owner becomes ill. Since the business has the same legal entity as the proprietor, it ceases to exist upon the proprietor's death. Because the enterprise rests exclusively on one person, it often has difficulty in raising long-term capital.

References[edit]

  1. ^ Family Business Sourcebook, Aronoff, Astrachan, and Ward