A sole proprietorship is an unincorporated business owned by a single person. It is also the most common type of business formed. Sole proprietorships are easy and inexpensive to create and operate. There is no need to hire an attorney, unless of course you have other reasons to, or just register with the government. The company is not required to file separate tax returns, and all profits and losses are reported on the owner’s personal return.
In some states and for certain businesses, a business license may be required. Most states, however, will require that the owner register the business name, if it is different from their own as a d/b/a, “Doing Business As.” The key point here is that sole proprietorships have some major disadvantages. The owner is responsible for all business debts, and will be held personally liable in the event of a lawsuit. Also, sole proprietorships have limited financing and funding options. They generally run off debt, and have no stock or memberships to sell.