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  • Writer's pictureNicole Bernier, Esq.

What is a Sole Proprietorship?

Imagine you decide to start selling handmade crafts. You don't fill out any special paperwork to start a "business structure," you just start selling. Congrats! You're now operating as a sole proprietorship.

Here's what that means:

  1. You and the Business are One: There's no separation between you and the business. It's like you are the business. This has some benefits, but also some downsides.

  2. Simplicity: Starting a sole proprietorship is super simple. Often, you just begin your business activity. Some places might require a business license or permit, but there's not much red tape to go through.

  3. Taxes are Straightforward: You report your business's income and expenses on your personal tax return. There isn’t a separate tax return for the business.

  4. Total Control: You're the boss. Every decision about the business is up to you because there aren't other owners or partners involved.

But, There are Some Risks...

  • Personal Liability: If the business owes money or gets sued, you are personally responsible. Unlike some other business structures, there’s no shield protecting your personal assets (like your home, car, or savings). They could be at risk. This is the main reason people decide to form an LLC. (See my post on LLCs here!)

Why Consider a Sole Proprietorship? It's a good option for someone who wants to:

  • Start a business quickly and with minimal hassle.

  • Have full control without needing to answer to partners or shareholders.

  • Avoid a lot of paperwork and administrative hurdles.

What to Remember: A sole proprietorship is the simplest form of business, but it doesn't offer personal liability protection. If the business faces financial or legal issues, your personal assets might be at risk. If this worries you, you might want to consider other business structures, like an LLC.

I hope this helps break down the concept of a sole proprietorship!

Have any questions?

If you have any questions or need assistance with forming your business, feel free to reach out. You can contact me by filling out the inquiry form at the bottom of my home page, and I will be in touch with you shortly after. I would be happy to chat and see if my services would be a good fit for you. I'm here to assist you every step of the way. Your business's success is my priority!

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