What are the Pros and Cons of a Sole Proprietorship?

What are the Pros and Cons of a Sole Proprietorship?

Pros and Cons of a Sole Proprietorship

What is a sole proprietorship? When starting a business, you will have to decide on a business structure. It does not require any formal action to form a sole proprietorship.​ If you are the sole owner and there is no filed legal structure for your business, then you are a sole proprietor.  You run and own the business by yourself.

In a sole proprietorship, there is no difference between you and your business.  Once you decide to establish a corporate structure, things get complicated. Let’s examine the pros and cons of a sole proprietorship.


A sole proprietorship will grant you complete control. You have the flexibility to run the business your way.

You are liable for all debts. This may sound like it should appear below, and it does, but there is a silver lining to this one. Lenders are more likely to extend credit when you need it.  Newly established entities often must wait a period of time before lenders extend credit.

You do not have to file a separate tax return for your business. However, be sure to consult your accountant about this. 


You wanted to be on your own. That means you are responsible for all business debts. Sole proprietorships have high turnover rates and smaller assets.  If those assets are not enough, creditors can go after your personal property to satisfy a claim. That liability extends to your house, your car and all other assets.

Appearances are not everything, but some feel that a sole proprietorship appears less professional than a corporation or an LLC. Depending on who you are doing business with, there is a certain trust placed in the corporate structure. On the other hand, some prefer the personal touch. Large corporations spend a lot of money trying to strike a balance between the two. What type of business do you envision yours to be? On the balance, my preference is for an entity structure instead of a sole proprietorship.

If you have questions regarding the legal structure of your business, contact this office for an initial consultation.   

The Law Office of H. Benjamin Sharlin LLC

is owned and operated by H. Benjamin Sharlin and serves all of Mercer County, New Jersey and the surrounding areas. Mr. Sharlin is a bilingual Spanish-speaking attorney who vigorously represents the interests of all his clients.

Call (609) 585-0606 or click the button below to schedule an appointment

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