According to business law, sole proprietorship is a distinction given to circumstances in which individuals who own a company is not held apart from their place of business. In this way, they are solely liable for all of its operations and are concurrently entitled to all earnings as well as total control over its dealings. In more specific terms, the owner and their company are interconnected as all company monetary considerations will be made placed into the filing of their own personal income taxes, therefore rendering an eventual return based upon an gains or losses.
In general a sole proprietorship, as according to business law, does not represent a "legal entity," and varying distinctions of it will not provide any means of achieving such a status. For instance, a sole proprietorship may be entitled with the actual name of the owner or another name, in either case will not affect it status in contrast to that of a legal entity. This type of ownership is often looked to as a desirable venture due to the straightforwardness in which it may be created and conducted with the appropriate resources, of course.
All that is initially necessary is the registration of their name(s) as well as the acquisition of "local licenses." All operations to follow are under the discretion and occur as a direct result of the owner's actions. All contracts and checks must possess their name only. Bank accounts are also possessed under the owner's name as opposed to a company name. There are no delegations of tasks or other joint activities that one would expect within a company.
In most cases, however, a sole proprietorship may evolve into more integrated forms as it grows. Though not necessarily a legal entity, sole proprietorship must still operate with the specifications of business law in mind as the authority in many of its dealings. For instance, lawsuits may be sought after in which the owner will file a claim under their own name as opposed to an entire company's title. If you need legal advice and assistance, contact business lawyers.
Similar to any endeavors within business, there do exist positives and negatives. The benefits that may be incurred consist of the following: the ease at which sole proprietorship may be instituted, absence of "formalities," the lack of a need to cover "unemployment taxes" that would be required if they were to have employees, the freedom to intermingle both "business and person assets," whole control over the company's direction as well as its future sale or transfer. Drawbacks do leave a lot to consider as well, however.
Any debts or other losses are the sole responsibility of the owner, so that there is no way out of it but through their own means, which may then affect their business and credit quite adversely. Owners may also not increase their capital by selling off parts of it, and such businesses do not have adequate life spans, past that of their owner. In addition to this is the fact that most investors are wary of putting their money in companies of sole proprietorship. This is due to the fact that they will be left depending on only one person, who may falter, leaving everyone in jeopardy of adverse outcomes.