SOLE PROPRIETORSHIP

DEFINITION
A sole proprietorship is a business owned by one individual.  A sole proprietorship is not considered to be a legal entity under the law, but is an extension of the individual that owns it.  The owner has possession of the business assets and is directly responsible for the debts and other liabilities of the business.

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 The sole proprietorship is the simplest form of all business structures.  In a sense, it does not involve a real "business" because the owner is the business and vice versa.  Legally, the two are one and the same.  And from a tax standpoint, the owner is basically considered self-employed, although an owner can take advantage of most of the business deductions that apply to other business structures.

As the sole proprietor, you have full and direct control over all aspects of your business.  Of course, as the sole owner you also have complete responsibility for the obligations of the business.  This is known as "unlimited liability," meaning you are putting not only the assets of your business on the line but your personal assets as well.  Its debts are your debts.  Any legal action taken against your business is being taken against you personally.

You may wish to consider this structure if you want something easy to start and operate.  Also, this structure allows you to use losses of the business to offset any income that you have for tax purposes.  You probably want to pass on this structure if you do not want your personal belongings (called assets) at risks.  This structure, though it can have any number of employees, can only have only one owner.  Therefore, if you have two or more people who want to have ownership in the business, you must consider one of the other structures.