1.11:
Sole Proprietorship
A sole proprietorship is a business owned and managed by a single person.
The owner has complete control over the business and its operations.
Meet Sarah, who loves baking cookies and decides to start her own cookie business from home. She sets up Tasty Treats as a sole proprietorship.
She decides what types of cookies to bake, their selling prices, and when to expand her business.
She manages all aspects of the business, from buying ingredients to marketing her cookies.
One of the main features of a sole proprietorship is that Sarah is personally responsible for any debts or legal issues the business may face.
This means if Tasty Treats cannot pay its bills, Sarah's personal assets, like her savings or car, could be at risk to pay off the business debts.
However, this business structure has advantages. Sarah keeps all the profits earned in the business and has complete control over decision-making without needing to consult partners or shareholders.
This simplicity and freedom make sole proprietorships a popular choice for small-scale entrepreneurs like Sarah.
1.11 Sole Proprietorship
A sole proprietorship structure offers the owner exclusive authority over all business decisions, from daily operations to strategic planning. This form of business is characterized by its simplicity and ease of setup, often requiring minimal registration, such as acquiring a business license.
Key features of a sole proprietorship include unlimited personal liability, meaning the owner is personally responsible for all business debts and legal issues. Consequently, personal assets, such as savings or property, may be utilized to settle business debts if necessary. Despite this risk, the sole proprietorship remains a popular choice due to its straightforward nature.
Globally, small-scale entrepreneurs are inspired by the control and independence offered by sole proprietorships. This structure allows you to retain all profits and make decisions independently, without the need to consult partners or shareholders. Additionally, business income is typically reported on your personal tax return, simplifying the tax process and motivating you to take the leap into entrepreneurship.