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What is a sole proprietorship? What are the disadvantages of owning a sole proprietorship?

lawtrades Sole Proprietorship

A sole proprietorship indicates that the business is owned by a single person who takes on full responsibility for the debts and profits.

The main disadvantage?

There is no distinction between your personal or professional assets. That means, in the event of being sued, you expose your personal assets. The individual is responsible for the debts and any other legal liabilities. Essentially, you could put your entire financial situation at risk if your sole proprietorship company is ever sued.

Sole proprietorships aren’t “bad,” but they may not be the best option for certain businesses. If your company is a higher risk of being sued, then you definitely don’t want to expose your personal assets. You see sole proprietorship often in home-based businesses, writers, consultants, etc.

For even more informatin, check out What Are Some Disadvantages of Sole Proprietorship?

Not sure how to form your company? LawTrades can help. We are the largest platform of freelance attorneys that are fully vetted and equipped with the experience that you need. Check out our website and get in touch if you’d like to discuss the details with a freelance business attorney.