What is a sole proprietorship business?
The Internal Revenue Service defines a sole proprietorship as an unincorporated business having one owner who’s responsible for the business’s affairs. Advantages enjoyed by a sole proprietorship include reduced costs, in comparison to other business entities, and ease of formation.FormationSole proprietors don’t have to pay fees or file special forms to operate as a sole proprietorship, according to the Nolo website. Completing general registration requirements in the appropriate state is enough to form a sole proprietorship. Most states require sole proprietors to obtain a business license.LiabilityAn owner of a sole proprietorship has unlimited personal liability for business debts and losses. Sole proprietors may lose personal assets as a result of business lawsuits or obligations. Personal creditors of a sole proprietorship may recover their funds by pursuing the assets of a sole proprietorship business.TaxesSole proprietorships have pass-through tax status. The IRS allows sole pr
