Sole Proprietorship

Operating a business as a sole proprietor

Operating as a Proprietor

Operating as a proprietor you own your business assets and personally operate your business. You are treated as one with the business for tax purposes. A sole proprietor is personally liable for the contracts and activities of the business. Your personal and your business assets are exposed to all personal and business liabilities. If you are married, you and all personal and business assets are responsible for all claims arising upon dissolution of your marriage.

Proprietorship Formalities

You do not have to observe any formalities other than licensure, if any, imposed by governmental entities, and registration 
for the use of a fictitious name. There are no reporting requirements except for tax returns.

Proprietorship Ownership

Ownership is not separated from control. You have no limitation from liability for both contracts and your actions. The result of all of this is that if you transfer all or a portion of your business the buyer will inherit your liabilities. This will raise concerns as to the continued operation of the business by the buyer.

Selling your proprietorship business

Often the buyer will want to continue the business in the same location and under the same name. Therefore, the concern for all of this liability will be reflected in the price and in the advisability of purchasing the business. If you sell this form of business the buyer will get business assets that are subject to the claims of your spouse or a former spouse for equitable distribution the sale of This is particularly true where the business is continued in the samename at the same location and where the name of the business includes the name of the proprietor. The business assets sold may be subject to the claims of a spouse or former spouse upon a claim for equitable distribution of marital property which may survive the dissolution of a marriage

Financing your proprietorship business

If you finance this form of business, you will have to use all of the your personal as well 
as your business assets. This includes your home, your hunting cabin, your Harley and your condo.
if the business fails you loose all of these assets.

Taxation of your business

All profits are taxed whether they are held for use in the business or used for its operations. 

Bringing another person into your business

If you bring another person into the business the business becomes a partnership. 
This occurs even if no formal partnership agreement is ever spoken or written. 
All of the consequences of partnership then apply. This applies whether the person
 is a member of the family or a complete stranger.

For all of these reasons, frequently a business is started as a sole proprietorship, and later morphs into another form.
If you are operating a business, the assistance of a skilled professional can help you protect what you have while maximizing your success. Call me at 570-826-0481 or at 800-221-0618(in Pennsylvania only).
I can help!

Operating as a Sole Proprietor

A sole proprietor owns the business assets, operates the business and is treated as one with the business for tax purposes. The proprietor is personally liable for all of the contracts and activities of the business. All of the proprietor’s personal as well as the business assets are exposed to all personal and business liabilities as well as claims arising upon dissolution of marriage.
There are no formalities required for this form other than licensure, if any, imposed by governmental entities, and registration for the use of a fictitious name. Other than tax returns, there are generally no reporting requirements.
Due to the lack of separation of ownership from control and the lack of any limitation on liability for both actions and contracts, the transfer of all or a portion of the business raises questions about the potential contingent liabilities of the buyer for the personal and business obligations of the seller and for the seller raises potential contingent liability for the continued operation of the business by the buyer.
This is particularly true where the business is continued in the same name at the same location and where the name of the business includes the name of the proprietor. The business assets sold may be subject to the claims of a spouse or former spouse upon a claim for equitable distribution of marital property which may survive the dissolution of a marriage.
Financing of this form of business normally requires the use of all of the proprietor’s personal as well as business assets. Since the business and the proprietor as taxed as one, all profits are taxed whether they are held for use in the business or used for its operations. If someone other than the proprietor is brought into the business, whether a member of the family or an unrelated third party, as a partial owner or part owner, the business becomes a partnership even if no formal partnership agreement is ever spoken or written. All of the consequences of partnership then apply. For all of these reasons, frequently a business is started as a sole proprietorship, and later morphs into another form.

Keeping a business viable requires access to extensive resources, including the trusted legal counsel of a top business attorney,
Payment Plans Available, Over 30 Years Experience.
If you are operating a business, the assistance of a skilled professional can help you protect what you have while maximizing your success. Call me at 570-826-0481 or at 800-221-0618(in Pennsylvania only).email: Stephen@gurdinlaw.com to schedule a free consultation
Regular Office hours 2:30 and 7 p.m. Monday through Friday by appointment. Earlier appointments available upon request.
I can help!