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Sole Proprietorship

A sole proprietorship is the simplest form to conduct a business. A sole proprietorship is a business that is conducted in the owner's individual capacity, without partners, and without the creation of a separate legal entity. It is formed without formalities, at the time when the individual starts to do business. There is no separate entity, and therefore income, profit and losses for the business are accounted directly on the owner's income tax.

There are no formalities for a sole proprietorship to exist, the owner simply must conduct business and it is formed. The owner, however, is still subject to any licensing requirements due to the nature of the business and must comply with any such license requirements. The owner of a sole proprietorship also is subject to the Fictitious Business Name Statute which requires that the owner file a certificate (a Fictitious Business Name Statement) and publish a notice (the notice is provided in Bus & Prof. C. ' 17900) if the name of the sole proprietorship does not contain the owner=s name (surname) or implies there may be additional owners. If an owner does not file the certificate, then the owner cannot use legal action for an obligation owed to the business until such certificate is filed.

The lack of a separate legal business entity (such as a corporation or LLC) means that the owner is individually liable to all creditors of the business and for other lawsuits brought against the business, therefore, there is no liability protection for the owner of a sole proprietorship. The biggest advantages of a sole proprietorship are that it can be formed easily and inexpensively and generally has lower start-up costs in terms of legal and accounting fees. A sole proprietorship is also freely transferable and its duration is determined solely by the owner's discretion (i.e. subject to owner=s willingness or ability to conduct business).

- Robert C. Norton J.D. LL.M.
  Stone, Rosenblatt & Cha, P.C.

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