This article may require cleanup to meet Wikipedia's quality standards. No cleanup reason has been specified. Please help improve this article if you can; the talk page may contain suggestions. (April 2012)

A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts. Every asset of the business is owned by the proprietor and all debts of the business are the proprietor's. This means that the owner has no less liability than if they were acting as an individual instead of as a business. It is a "sole" proprietorship in contrast with partnerships. Definition by Glos&Baker. "A sole proprietorship is a business owned by one person who is entitled to all of its profits" Definition by Reed& conover "The single or the sole proprietorship is a business owned and controlled by one man even though he may have many other persons working for him" A sole proprietor may use a trade name or business name other than his or her legal name. In many jurisdictions there are rules to enable the true owner of a business name to be ascertained. In the United States there is generally a requirement to file a doing business as statement with the local authorities.^[1] In the United Kingdom the proprietor's name must be displayed on business stationery, in business emails and at business premises, and there are other requirements.^[2]

Advantages[link]

There are many advantages of corporations that are described in that article; chiefly they are the ability to raise capital either publicly or privately, to limit the personal liability of the officers and managers, and to limit risk to investors. Sole proprietorships also have the least government rules and regulations affecting it.

Disadvantages[link]

Raising capital for a proprietorship is more difficult because an unrelated investor has less peace of mind concerning the use and security of his or her investment and the investment is more difficult to formalize;^[3] other types of business entities have more documentation.

As a business becomes successful, the risks accompanying the business tend to grow.^{[citation needed]} One of the main disadvantages of sole proprietors is unlimited liability where the owner's personal assets can be taken away. This is particularly true for liabilities created by employees; a corporation only partially shields an owner or officer for his own actions according to the principle of piercing the corporate veil. Lack of continuity. The enterprise may be crippled or terminated if the owner becomes ill. Since the business is the same legal entity as the proprietor, it ceases to exist upon the proprietor's death. Because the enterprise rests exclusively on one person, it often has difficulty raising long-term capital.

References[link]

1. ^ http://www.dbaform.com/faqs-dba.php#986
2. ^ Companies House Booklet GP1, Chapter 10
3. ^ Family Business Sourcebook, Aronoff, Astrachan, and Ward