What is a Sole Proprietorship Business?
What is a sole proprietorship? Well, a sole proprietorship is simply defined as the business model wherein one person owns and runs the entire business entity, with no separation between that person and that entity. A sole proprietor is different from a partnership because there is no third party involved.
There are many benefits to operating a sole proprietor business. The most obvious benefit is that there is no liability for debts, taxes, or debts of any kind that the business may incur during operation. Another great advantage to the sole proprietor business model is the ability to own a business at any age. Also, the sole proprietor business has an unlimited amount of employees, partners or employees, as long as they are all over the age of 18.
Some disadvantages of the sole proprietor concept include but are not limited to the lack of liability. Another disadvantage of a sole proprietor is that there is usually no legal protection from co-owners, or siblings. Also, in some cases, there is only one owner; another person assumes control and becomes the face of the company. In other words, there is only one owner. It is important to understand that this type of business is more easily disrupted and can be much less stable than other types of businesses. Owners cannot leave one part of the company and expect the company to continue without him/her.
Many people may ask, what is a sole proprietor business, then? A sole proprietor business is one in which one person owns the entire business while others, called partners, share in the profits. When you start a business with only yourself as the sole proprietor, you have complete control over it. However, when you start a business with other people as partners, you share in the profits but do not have ownership in the business. You are still able to use your personal credit and debit cards for purchases, but if a partner makes a purchase, your credit and debit card will be charged for the full amount.
You do not have to disclose the name of the partners in your business when asking what is a sole proprietor business. Therefore, potential customers may have a difficult time finding out that the business is owned by others and may feel entitled to a refund or an explanation as to why their charges on the company card are not being shared. This may result in an increase in fraudulent transactions and customers who feel entitled to a refund because they did not receive what they expected from the business. In a sole proprietor business there is usually no regulation regarding fees and rates.
A sole proprietor does not have to file any articles of incorporation or report the annual profits and losses on a annual statement. The only report that a sole proprietor business must file is the statement of accounts. The only way to know what is a sole proprietor business is to get all of the information on the business from the state business bureau. Most cities and counties have their own laws regarding sole proprietor businesses. If the state laws are different than the city or county laws, a lawyer can be consulted to make sure that your chosen method of business management meets the legal requirements.
What is a sole proprietor business means different things to different people. For some people it is simply a business name combined with their name. It may also mean that you are sole owner to the business and are responsible for all activities. Other people want to know if they are joint owners of the business. They may want to know if they are financially responsible for the company. In most states both sole and joint owners are reported.
When it comes to what is a sole proprietor business, there are more things than just being the sole owner. You have to be legally responsible for all business activities as well as being personally liable for all items brought into the business, unless you have a written warranty for the items within the business. There are many types of sole proprietor business that include limited liability partnerships, corporation and LLCs. You should always do your research before making any decision when it comes to what is a sole proprietor business.