Business Formation

What Are Some of the Advantages or Disadvantages of a Sole Proprietorship?

Advantages

  • The business owners maintain complete control of their business, and within the law, may make decisions as they see fit.
  • Forming and organizing a sole proprietorship is easy and inexpensive.
  • Sole proprietors obtain all the income generated by their businesses to re-invest or keep.
  • If desired, the business owners may easily dissolve the sole proprietorship.

Disadvantages

  • Unlike corporations, sole proprietorships have unlimited liability and are legally responsible for all debts made against the business.
  • With unlimited liability, business and personal assets may be at risk.
  • Sometimes sole proprietorships have a hard time attracting high-caliber or highly qualified employees, especially those who may motivated by an opportunity to own a part of the business.
  • Sole proprietorships can be at some disadvantage when attempting to raise funds and are often limited to using funds from consumer loans or personal savings.