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SOLE PROPRIETORSHIP
A People’s Choice can save you hundreds of dollars by preparing all necessary business formation documents instead of an expensive attorney! Call us today to get your business started now!
Business Learning Center
Our online learning center provides quick access to valuable information contained in our web site,
California and Federal Codes, Court web sites and other legal sources of information.
Sole Proprietorship:
A sole proprietor is the simplest form of business. The prevalent characteristic of a sole
proprietorship is that the owner is inseparable from the business. It is not a separate entity. Because they are the same
entity, the owner of a sole proprietorship has complete control over the business, its operations, and is financially and
legally responsible for all debts and legal actions against the business. Another aspect of the "same entity" aspect is that
taxes on a sole proprietorship are determined at the personal income tax rate of the owner. In other words, a sole proprietorship does not pay taxes separately from the owner.
A sole proprietor may do business with a trade name other than his or her legal name. Sometimes a sole proprietor is
required to file a fictitious business name statement with a local government even if it is the same as his actual name for
certain types of businesses or as a requirement to open a business banking account. Once your business is established, you must also obtain the necessary licenses and/or permits.
A sole proprietorship is a good business organization for an individual starting a business that will remain small, does not
have great exposure to liability, and does not justify the expenses of incorporating and ongoing corporate formalities.
Points to Consider:
Unlimited Personal Liability for Loss:
In a sole proprietorship, the owner is personally liable for the company, thus placing his or her entire personal assets and wealth at risk. If an owner is married, that owner puts the
community property at risk as well.
Management and Control:
The owner (sole proprietor) has total management and control over the company.
However, the price for total management and control is that the owner is at risk for personal liability incurred through the acts of the owner’s agents or employees.
No Formalities:
With the exception of complying with any applicable licensing requirements, there are no
formalities required of a sole proprietorship. Note, however, where the business is conducted under a name
which does not show the owner’s surname or implies the existence of additional owners, California, for example,
requires that the owner file a fictitious business name statement and publish notice.
Transferability: The owner can sell the business as he or she pleases.
Duration:
The sole proprietorship remains in existence for as long as the owner is willing or able to stay in business.
A People’s Choice can save you hundreds of dollars by preparing your
business formation documents instead of an expensive attorney!
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