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

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A sole proprietorship is a type of enterprise that is formed, financed, and run by a single person with the main aim of making a profit. The proprietor usually pays income tax on the earnings that he or she receives from the business.


1. It's fairly easy to set up. A sole proprietor only needs to register their business name and pay for the relevant trading licenses to begin operations.

2. The sole proprietor doesn't have to file two separate tax returns, since the income from the business passes through them. The owner only needs to file income tax returns.

3. Since the sole proprietor is the one in charge of everything, decision-making is fast.

Major Drawback

Despite all the advantages, a sole proprietorship is very risky since the owner's property can be used to settle overdue debts. There's no separation between the business and the owner.


For a person who is venturing into business for the first time, sole proprietorship is appropriate due to the tax advantages it gives the owner. However, as the business grows, the person should change it into a limited liability company to protect their assets from liability claims.

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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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