Sole Proprietorship

Mastering Success as a Sole Proprietor

A sole proprietorship is the easiest way to start a business in Texas. However, it also comes with the greatest exposure to liability and can be difficult to expand and sell. It is important to consider the advantages and disadvantages of utilizing a sole proprietorship as well as alternative business entities available for you to use, including: LLCs, PLLCs, Corporations, and Partnerships. The attorneys at West & West, Greer & Estorga can help small business owners throughout Texas, including Central Texas, South Texas, the Texas Hill Country, San Antonio/Bexar County, Seguin/Guadalupe County, Kerrville/Kerr County, Bandera/Bandera County, New Braunfels/Comal County, and Boerne/Kendall County determine which business entity is best for them.

Sole proprietorships offer easy startup and sole control, they also entail personal liability, lack of continuity, and challenges in growth and selling…

Advantages of a Sole Proprietorship

Cost: Sole proprietorships are the cheapest way to begin operating a business. The only requirements for operating as a sole proprietor are choosing a business name for your sole proprietorship and registering your assumed business name, if it is different from your legal name. If you plan on hiring employees you will need to get an Employer Identification Number.
Sole Control: In a sole proprietorship the business owner has sole control of the business and business decisions. However, other business entities allow a business owner to have sole control of their business as well.
Taxation: There is no corporate taxation. Business gains and losses can be reported on the business owner’s individual tax return.

Disadvantages to a Sole Proprietorship

Liability: A sole proprietor is personally liable for all of the business’s debts and liabilities. This means a sole proprietor’s personal assets can be at risk if the business cannot pay its debts and liabilities.
Business Continuity: A sole proprietorship ceases to exist upon the death of the owner since the owner and the business are one.
Self-employment Taxes: Owners of a sole proprietorship are required to pay Social Security and Medicare taxes on the income the business produces.
Growth and Sale: If the owner of a sole proprietorship needs to raise money it could be difficult. Investors are less likely to invest money in a sole proprietorship. Likewise, it could be difficult to get loans if the owner does not have sufficient credit or assets. Selling a sole proprietorship can also be difficult.

If you are thinking about starting a new business or need a lawyer to help with your existing business contact us today.