Bus Law Final Sole Proprietorship

Ease and Cost of Formation and Ongoing Formalities

How easy and inexpensive it is to create and maintain a business entity, including required paperwork, filings, and legal formalities.

Personal Liability

The extent to which owners are personally responsible for business debts, lawsuits, and obligations.

Taxation (Double Taxation)

How the business and owners are taxed; double taxation occurs when the business pays taxes on profits and owners also pay taxes on dividends.

Access to Capital / Funding

The ability of a business to raise money through loans, investors, or other financing sources

Control / Management

Who has authority to make business decisions and manage operations.

Transfer of Ownership

How easily ownership interests in the business can be sold or transferred to another person

Sole Proprietorship

The simplest form of business ownership where one person owns and manages the business and the business is not a separate legal entity.

Separate Legal Entity

A business recognized by law as separate from its owners.

Autonomy

Complete independence and control over business decisions.

Unlimited Liability

The owner is personally responsible for all business debts, obligations, and legal claims. Personal assets may be used to satisfy business debts

Personal Assets

Property personally owned by an individual, such as a home, car, or savings

Formation

The legal process of creating a business entity

Formalities

Required legal procedures or documentation needed to create or maintain a business.

DBA (Doing Business As)

An assumed business name different from the owner’s legal name.

EIN (Employer Identification Number)

A tax identification number assigned to businesses by the IRS

Goodwill

The intangible value of a business based on reputation, customer relationships, and brand recognition

Intellectual Property (IP)

Intangible creations such as trademarks, inventions, logos, or copyrighted material.

Advantages of Sole Proprietorship

• Easy and inexpensive to create

• Few formalities or government filings

• Full owner control and autonomy

• Pass-through taxation (no double taxation)

• Flexible management structure

• Total control over finances

Disadvantages of Sole Proprietorship

• Unlimited personal liability

• Limited access to capital and investors

• Difficult to transfer ownership

• Cannot add another owner without changing business form

Corporation

A separate legal entity owned by shareholders that provides limited liability protection.

LLC (Limited Liability Company)

A business structure combining limited liability protection with pass-through taxation

Partnership

A business owned by two or more people who share profits, losses, and management responsibilities

Limited Liability

Protection preventing owners from being personally responsible for most business debts and lawsuits

Shareholder

An owner of a corporation

Member

An owner of an LLC