Los Angeles Business Attorney Discusses Sole Proprietorship
Among the many types of business structures, a sole proprietorship is the simplest. A sole proprietorship is exactly what the name implies. It is a company that is owned by one person. A sole proprietorship cannot have more than one owner.
The Law Office of Eric J. Proos, P.C. works with companies that have started as sole proprietorships, have grown, and had to restructure into a different entity type.
Characteristics of a Sole Proprietorship
Each entity type, whether it’s an LLC, Corporation, Partnership, or Sole Proprietorship has its own characteristics. Generally, a sole proprietorship has the following characteristics:
Formation Requirements: This is the easiest type of business to form. There are no forms to complete, no filing with the state, and no by-laws to draft. One task you must complete is to register the sole proprietorship with the city and/or county it is located within in order to pay taxes.
Tax Treatment: Since a sole proprietorship is not a separate business like an LLC, corporation, or partnership, all income is treated as personal income. You as the owner of the sole proprietorship will pay taxes on all the income, there are no company filings to complete.
Personal Liability: Once again, since this is not a separate business like an LLC, corporation, or partnership there is no personal liability protection. This means that if your company breaches a contract or someone slips and falls in your store, then you may be personally liable for any judgment or settlement. This can result in seizing personal bank accounts, real estate, residential properties, and more. This is a major concern for owners of a sole proprietorship.
Whether you are operating as a sole proprietor, would like to learn more about sole proprietorships, or would like to discuss a different entity type, The Law Office of Eric J. Proos, P.C., is waiting for your call.
Call Los Angeles Business attorney, Eric J. Proos, for your free 30-minute consultation.