Exploring sole proprietorships (with 5 popular examples found in the US)
A complete overview of the business structure.
A sole proprietorship is a type of business structure that is operated typically by one person. They are considered to be a sole trader. A good way to understand sole proprietorships, is to think of the owner of the business as self employed. Therefore, all the profits, and all the costs, are their responsibility. In a sole proprietorship, the owner can conduct and manage the business by themselves and still create a successful, running business.
- Visit this site for more expert analyses on sole proprietorships from TRUiC.
What are examples of sole proprietorships in the US?
Nowadays, the job of being a freelance writer seems to be gaining in popularity. This is an excellent example of a single person operating a sole proprietorship. A single writer can manage their business and build it successfully. The ability to write in your own time, in your own space, pick and choose your contracts and receive an income (often at your set rate) is proving attractive. Therefore, you have more control over your business by operating a sole proprietorship.
- The simplicity, control and privacy that comes with operating a sole proprietorship makes it an inviting business structure choice to Americans wanting to start up their own businesses.
Think of your family-owned Italian restaurant around the corner from you. A sole proprietorship can be created by setting up a local restaurant. As a single person wanting to own a restaurant and operate it under their own control and vision, a sole proprietorship is a good option. Additionally, no legal costs are incurred to set up a sole proprietorship (unlike for an LLC/corporation) which makes it an attractive business structure. By operating a restaurant, you may find that you require additional help operating your business. As a sole proprietorship you are able to hire employees. The owner simply needs to apply for an Employee Identification Number (EIN).
- Interesting fact: Over 75% of businesses in the United States are sole proprietorships.
This is a well-liked career option for organised assistants interested in earning additional income by setting up a business on the side (of full time). This career option allows you to choose your own clients, work more personally with them and develop your business from a start-up to a success.
- In a sole proprietorship, the single operator/manager of the business (usually the owner) has the claim to 100% of the profits made. However, they are also responsible for 100% of the debts/losses. A sole proprietorship is not considered a legal entity, therefore no asset protection is provided.
If you have previously worked for a company, and you want to choose your own clients, setting up a sole proprietorship would be ideal. Usually, financial planners that have started their own business offer their services to individuals or smaller businesses (to ensure they can handle the workload operating solo).
- Setting up sole proprietorships generally costs less than starting an LLC or corporation. Therefore, a single person can start a sole proprietorship and quickly turn a profit.
This is a popular choice for excellent home cooks/bakers looking to earn extra income. A local catering business can be set up quickly by forming a sole proprietorship. A good idea for branding and marketing your sole proprietorship (if you do not want to use your legal name) is to file for a DBA (doing business as/ trade name).
- If you decide on forming a sole proprietorship for your start-up business, but later it grows too large to manage on your own you subsequently can form an LLC/corporation. Sole proprietorships allow you to keep your options open with ways to supplement your business (e.g. DBA’s) or transform it (forming an LLC/corporation).