What advantages does a sole proprietorship offer and what is a major drawback of this type of organization?

Asked on by soman2006

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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A sole proprietorship offers its owner more autonomy than any other form of organization.  It also tends to be easier and less expensive to set up.  However, it also means that the proprietor has unlimited liability for debts incurred by the business.

In a sole proprietorship, the owner has no one else to answer to.  They can run their business as they like with complete autonomy.  This can be both satisfying and efficient.  In addition, there is less paperwork in this kind of ownership.  There are fewer regulations having to do with setting up in business and the taxes are much easier to do.

However, a sole proprietor is completely responsible for all liabilites the business incurs.  Debts incurred by the business can be recouped, for example, by going after the owner's assets like their house.  This is the most important drawback of this sort of business.

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