A sole proprietorship is any business that is owned by one person. They can be small or large businesses, with incomes ranging all over the place. There are pros and cons to having a sole proprietorship, a few of which will be mentioned here.

If you are a business owner in a sole proprietorship then all money matters will land on you. If there is a need for more capital then you are the one who will need to convince the banks that you are not a credit risk. Many banks are leery of lending large amounts of capital to small businesses. You also should be cautious when borrowing money for your business as all liabilities will also land on you.

What Liabilities?

All businesses come with some risk or liability. For example: If you have a cabinet business, then every cabinet that you make and install puts your business at risk. If one falls, and injures someone, what will happen to your business? You will also be held accountable for all profits or losses of the company.

Profits Or Losses

Every penny that your company makes or looses will need to be claimed on your personal tax return. This is another area where liability comes into play. You are liable to report earnings appropriately or suffer the fines and penalties that go along with it. If your company is doing well, then be aware that you will have a higher tax liability to Uncle Sam. The pro to this is that all of the profits are yours. They do not need to be shared.

Self Reliance

Owning your own business makes you self reliant. Yes, you will be held accountable, but you will also be the one that reaps the rewards of a business that is successful. There may be extra work associated with a sole proprietorship, but you call the shots, and you get to do what you want with the profits of its success.

Owning your own business can be frightening. Make certain that you understand all of the risks involved with your chosen business path. High liability concerns may have you choosing a different business form.

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