Frequently Asked Questions

If you want to quickly start a small business, with complete authority on how it’s run, Sole Proprietorship is the right choice for you.

It is a great option for small, local businesses that don’t plan to expand to multiple locations. That’s why a Sole Proprietorship is the preferred option for family-run businesses.

Here are the five key characteristics of Sole Proprietorships:

  • The business is not a separate legal entity and is tied to its owner
  • Sole Proprietors are personally liable for their business’s financial liabilities and business debts
  • Profits and losses go directly to the owner’s personal income
  • A Sole Proprietorship allows pass-through taxation — Sole Proprietorship income is taxed as part of the owner’s personal income tax returns
  • The business owner has complete authority over how the business is run

The key advantages of a Sole Proprietorship are administrative control over the business and the fact that the owner gets all the business profits.

As a Sole Proprietor, you decide how your own business is run, how long you want to work, etc. You are your own boss and make all business decisions without interference.

Also, you don’t need to pay corporate taxes as an unincorporated business and even your personal income taxes are not as hefty.

As a Sole Proprietor, you don’t just get all the profits, but also need to bear all the losses. The biggest disadvantage of Sole Proprietorship is unlimited liability. This means that you are responsible for your business’s debts and your personal assets can be seized to recover those.

Another disadvantage is that you not only pay income tax, but also a self-employment tax.

Starting a Sole Proprietorship is quicker, easier, and cheaper than forming any other type of business. And with GovDocFiling’s expedited processing, you can start the process by simply filling out one application form. We’ll take care of all the paperwork and legal hassles, while you focus on how to run and grow your business.