Sole Proprietorship

(redirected from Sole proprietor)
Also found in: Dictionary, Thesaurus, Financial, Encyclopedia.

Sole Proprietorship

A form of business in which one person owns all the assets of the business, in contrast to a partnership or a corporation.

A person who does business for himself is engaged in the operation of a sole proprietorship. Anyone who does business without formally creating a business organization is a sole proprietor. Many small businesses operate as sole proprietorships. Professionals, consultants, and other service businesses that require minimum amounts of capital often operate this way.

A sole proprietorship is not a separate legal entity, like a partnership or a corporation. No legal formalities are necessary to create a sole proprietorship, other than appropriate licensing to conduct business and registration of a business name if it differs from that of the sole proprietor. Because a sole proprietorship is not a separate legal entity, it is not itself a taxable entity. The sole proprietor must report income and expenses from the business on Schedule C of her or his personal federal income tax return.

A major concern for persons organizing a business enterprise is limiting the extent to which their personal assets, unrelated to the business itself, are subject to claims of business creditors. A sole proprietorship gives the least protection because the personal liability of the sole proprietor is generally unlimited. Both the business assets and the personal assets of the sole proprietor are subject to claims of the sole proprietorship's creditors. In addition, existing liabilities of the sole proprietor will not be extinguished upon the dissolution or sale of the sole proprietorship.

Unlike the managers of a corporation or a partnership, a sole proprietor has total flexibility in managing and controlling the business. The organizational expenses and level of formality in a sole proprietorship are minimal as compared with those of other business organizations. However, because a sole proprietorship is not a separate legal entity, it terminates when the sole proprietor becomes disabled, retires, or dies. As a result, a sole proprietorship lacks business continuity and does not have a perpetual existence as does a corporation.

For working capital, a sole proprietorship is generally limited to the individual funds of the sole proprietor, along with any loans from outsiders willing to provide extra capital. During her lifetime, a sole proprietor can sell or give away any asset because the business is not legally separate from the sole proprietor. 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.


S Corporation.

sole proprietorship

n. a business owned by one person, as distinguished from a partnership or corporation.

References in periodicals archive ?
Still, many firms and sole proprietors have a great deal of succession planning work ahead of them.
These sole proprietors saw the biggest lift in sales on Cyber Monday, even more than on Black Friday and Small Business Saturday.
According to IRS estimates last made for 2001, 70 percent of the sole proprietor tax returns reporting losses had losses that were either fully or partially noncompliant.
So, if a painter, plumber, cabinet installer, or other sole proprietor in construction asks you to form a corporation to continue a workers' comp exemption, do not be surprised but do be ready to form it quickly for one very good reason: Your client might not be able to find work without it.
Summary of Advantages To the Estate or Family of the To the Purchasing Employee Decease Sole Proprietor A fair price for the deceased's The arrangement will give the business interest is assured.
The final regulations also clarify that "affected taxpayer" includes any business entity or sole proprietor with a principal place of business in a covered disaster area.
The remaining assets and financial records were seized from Schultz, the firm's sole proprietor, and turned over to Westwood attorney David Ray.
The electrician is a sole proprietor who operates under a trade name.
You are sole proprietor, partner or shareholder of a closed corporation and you ask, "What is a buy-sell agreement and why do I need one?
These plans, which are the only sole proprietor plans currently available through HealthPass, are designed exclusively for sole proprietors whose businesses are based in the five boroughs of New York City and Long Island.
In Chief Counsel Advice (CCA) 200524001, the IRS held that a self-employed individual who is a sole proprietor and purchases health insurance in his or her own name may treat it as purchased in the name of the sole proprietor business.