A sole proprietorship is the most basic form
of business organization and can be used in a wide variety of circumstances.
Sole proprietorships are relatively inexpensive to set up and require few legal
formalities. Rather, a sole proprietorship exists whenever an individual
carries on business for their own account without the involvement of
other individuals, except as employees.
Many small businesses are organized as sole
proprietorships. All benefits flowing from
the business, such as income and assets, accrue to the exclusive enjoyment of
the sole proprietor, and correspondingly, all obligations including losses,
contractual and tortious liability associated with the business are also the
sole proprietor’s responsibility. One of the major disadvantages of sole
proprietorships is that there is no limited liability for the sole proprietor;
all business and personal assets may be seized in fulfilment of their business
obligations and liabilities. The sole proprietor can limit his or her personal
liability by contract, or by purchasing insurance.