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Pros and Cons of Sole Proprietorship


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Legal Structure

Pros and Cons of Sole Proprietorship


You are in business

Easy to form
There are hardly any restrictions and very few forms to fill out. You need only file with your local city or county clerkís office.

Control of profits
As a sole proprietor, you control all of the money made by the business.

Control of decision making
You make all business operation calls.

You are management and, thus, can respond more quickly to day-to-day changes and decisions.

Freedom from bureaucracy
You experience less government control and taxation.

Simpler Taxes
You donít have to do a separate tax return for the business and, particularly, you donít have to prepare a balance sheet for the business.


Unlimited liability
As a sole proprietor, you are responsible for 100 percent of all business debts and obligations. This liability covers all of the proprietorís assets, including his or her house and car. Additional insurance coverage may be needed to cover personal injury or physical loss that may hamper the continuity of the business.

Fragile business existence
The death, physical impairment, or mental incapacitation of the owner can result in the termination of the business.

Difficulty raising capital and financing
It is typically more difficult for sole proprietors to raise operating cash or arrange long-term financing because they have fewer assets.

One view, one way of doing business
All the decision-making power rests with one individual.

Less professional appearance
A sole proprietorship appears less professional than a partnership, and certainly less so than a corporation.

* Source Streetwise Small Business Start-Up

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