Sole Proprietorship
Many small businesses operated by a single individual adopt sole proprietorship format of
business organization. It is the most basic type of business organization. It is also the least
expensive to create and the easiest to operate and dissolve. Sole proprietorships can be
incorporated if the owner so desires. Not being a legal entity, single scratch sole proprietorships
disappear after the death of the owner. This type of business is essentially a format for a single-
person business (although many have between one and ten employees), where the owner
makes all the decisions related to the business’s operations. The owner can extract all profits
from the business for his or her personal use, or the owner can decide to reinvest any portion of
the profits back into the business. It is interesting to know that 70 percent of all businesses in
the United States are sole proprietorships yet they only produce 20 percent of all the nation’s
profits. [4] Because a single proprietorship is not a legal entity, any income generated by the
business goes directly on the owner’s personal tax return. However, the single owner is also
personally responsible for any debts that the business acquires. This means that the owner may
put his or her own personal assets at risk. In addition, this business organization means
unlimited liability for its owner. The format means that there is very little opportunity to raise
funds from sources other than the owner’s own capital or consumer loans.
