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Sole Proprietorship Information

The definition of a sole proprietorship is when a person does business as himself. There is no legal separation between the entity which is the business and the person. For tax purposes, both use the person's social security number as identification and both file one tax return (although business expenses can still be deducted).

Like other businesses, a sole proprietor needs to have a license to do business in his town and may use an assumed name, so that he would be Joe Blow doing business as Blow Holes.

The business assets may be sold which, in effect, transfers the business.

At the death of the sole proprietor, the business is usually dissolved. The proprietor's estate, however, can sell the assets or continue the business if the survivors have the necessary skills.

There are no legal costs to forming or maintaining a sole proprietorship other than obtaining a business license and fictitious name, if needed.




There is nothing one must do to become a sole proprietor and there are no legal requirements for paperwork or state filings (except for assumed name and county business license). There are no restrictions on how to run the business legally. There is no registration necessary when operating in other states (except for the assumed name if there is one and business license). Therefore, it is low cost and low effort.




All the assets of the business and the person are one. Therefore if the business is sued or in debt, the person is sued or in debt as there is no separation between the person and the business. The bankruptcy of the business is the bankruptcy of the owner. Also, the liability of person for the business does not end if the business does since they are one and the same.

Perception is also some times that sole proprietors are not as professional as those who have formed corporations or LLC's.

Readers are cautioned not to rely on this article as legal advice as it is no substitution for a consultation with an attorney and an accountant in your jurisdiction. Based on jurisdiction and time, the law varies and changes.

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