The first step in forming a business entity is deciding what type would best protect the future of your company. A " sole proprietorship" is the simplest, and initially, the most frequently used form of business entity. It is owned and operated by a single individual. The use of the term "sole" is intended to contrast it with a partnership which has multiple owners, even between a husband and wife. Effectively, there is no legal distinction between the owner and his or her business. The owner receives all profits (subject to fairly reasonable and standard tax consequences), but 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 own as well.
Dissimilar to a corporation, the owner has unlimited personal liability when using this form of business. This may be considered to be a disadvantage. Corporations, for the most part, protect the owners (shareholders), investors, officers, managers and employees from personal liability. With a sole proprietorship, the business and the owner are treated as being one and the same, with personal liability for the actions of the business being the personal burden of the owner.
However, corporations have a number of disadvantages: a sole proprietorship has simpler cash management issues: the corporation has purchasing, accounting, and definitely more legal, requirements to be attended to each and every year. Corporations also have their own set of special tax and governmental fee obligations to contend with, are more expensive to start up, or even to discontinue, with concomitant legal and governmental fees and expenses. This contrasts to the sole proprietorship which can be formed or dissolved (almost) on a whim.
Note that all businesses have inherent responsibilities that must be attended to, including but not limited to:
1. Fictitious name ("d/b/a") registration requirements.
2. Local licensing (permitting) obligations.
3. Potential business tax and fee impositions.
4. Liability insurance protections.
5. Wage and hour law observation.
6. ADA compliance.
With over 30 years in the practice of business law, Attorney Godfrey has the broad experience needed by business owners in making the correct decision that will lead their business to success.