5 Types of Sole Proprietorship Businesses to Start

As the owner of a sole proprietorship, you are fully liable if something goes wrong with your business. Unlike other business types that protect your personal assets, this one puts you at risk of losing everything if you have debts incurred. A partnership is a business structure that involves two or more individuals who share ownership of the company.

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A sole proprietor is someone who owns an unincorporated business by themselves. If you are the sole member of a domestic limited liability company (LLC) and elect to treat the LLC as a corporation, you are not a sole proprietor. While incorporation comes with many advantages over sole proprietorship, incorporation is by far the preferable structure if you want to grow and hire people. In West Malaysia, the registration of sole proprietors come under the purview of the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia, abbreviated as SSM).

Of course, running an effective catering company involves hard work and dedication, but once established, these businesses can generate a substantial business income. Learn how to effectively use the 7 functions of marketing—promotion, selling, product/service management, information management, pricing, financing, and distribution—to boost your business. James Cash Penny used to be an employer in 1988 for a small retail chain until he bought the shares from the existing partners. Penny, as a sole proprietor but ended up incorporating about 25 years later. As a freelance writer, you would be providing written content for people or brands for their marketing efforts.

To highlight the variety of opportunities, we’ve compiled a list of 10 examples of sole proprietorship businesses for you to explore below. As a sole proprietor, you will have to fill out Form 1040, which is the standard form for individual taxes. After that, you need to file Schedule C, which reports all the losses and profits incurred by your business. The tax amount that you know will be based on the income of both files combined. At first, Coca-Cola started as a sole proprietorship, owned by Dr. John S. Pemberton in 1886 and bought by Asa Chandler in 1892.

Forms & Instructions

1. A sole proprietorship is a type of business entity that is owned and operated by one individual.
2. Let’s go into the steps, costs/fees, documents, and tools you can use.
3. Anyone who wants to name their business needs to file a DBA (doing business as).
4. “With sole proprietors, what we often notice is that their business and their personal lives end up being very intertwined, certainly from a taxation perspective,” says Kos.
5. Operating as a sole proprietor can be more challenging and limit growth prospects.
6. Most people interested in entrepreneurship have heard the term sole proprietorship many times.

Owners put their own resources to bear when going into business for themselves. There are limits to their financial resources and the amount of credit they get when they seek out lending relationships. To be successful, proprietors must be “good enough” at the various aspects of their business they have control over.

This accountability is clearly outlined within legal documents signed with lenders, sometimes called a promissory note. A proprietor does not need to provide a personal guarantee to their sole proprietorship, as the two are the same legal entity in the eyes of the law. While sole proprietorships are easy to set up, that ease may come at the expense of certain protections you would get through an LLC or incorporated business entity.

Understanding the Different Types of Businesses (Sole Proprietorship, Partnership, LLC, Corporation)

You also need to apply for a sales tax license with your state if you’re going to sell taxable products such as clothing, electronics, and more. Yashna has 11+ years of HR experience across Talent & Development, HR Business Partnering, Compensation, Hiring, Employee Engagement, and Performance Management. She was VP of HR at JP Morgan London, and then Head of HR at Plotify Financial London and New York. She has experience with both corporate and start-up cultures across multiple jurisdictions.

1. As a sole proprietor, you do not need financial statements to handle your finances, as a corporation needs.
2. It ensures that no other business can use the same name within your state or jurisdiction.
3. Once you find the one that works best for your skills, you may use the sole proprietorship as a stepping stone to launching a career.
4. One of the most common sole proprietorship examples is a tiffin or a canteen service for working professionals.
5. In the Netherlands, a sole trader is categorized as a “ZZPer”, and must register with the Chamber of Commerce and get a VAT ID.6 Not all ZZPers are sole traders.
6. Equipment and other long-use resources required for the business must be rented or financed.
7. Banks and other creditors are more likely to lend more money to a partnership.

In this structure, business continuity depends on the owner’s presence. For instance, say you’re unable to continue running your business due to illness, death, or other problems. Your business might cease to exist if you don’t have a clear succession plan in place. Any sales on credit, and any cash paid towards expenses, must be financed by working capital.

For example, you’ll need an electrical contractor license or a journeyperson electrician license to operate as an electrician in the US. You can find information for your relevant industry on the Small Business Administration (SBA) website or your state’s business portal. With Connecteam’s team instant messaging features, sole proprietors managing teams can effortlessly and securely communicate with team members. It’s an affordable and straightforward solution for handling workplace conversations, even on the go. While having complete control over decisions is great, your business will lack diverse skills and knowledge. For example, a restaurant with an owner who excels at cooking but doesn’t know how to market could see its sales suffer.

Each of these has its own operational, accounting, tax and legal requirements. sole proprietorship examples For the sole proprietor, there are a variety of options in obtaining financial support for their business, including loan facilities available from the U.S. The loans are not originated by the SBA, but the administration does guarantee loans made by various independent lending institutions. Use a work management software solution to simplify managing your sole proprietorship.

This can include anything from non-fiction articles and blog posts to news articles, web pages, and social media advertising. “I often like to remind people that everything goes through your bank account. So, if there is an audit, they are going to see into your personal life,” says Kos. He says the mixing of personal and business expenses, the intrusiveness of a possible audit and the greater chance of auditors turning up a bad bookkeeping practice or a questionable expense make this problematic. A sole proprietor can be a freelancer, running a one-person operation, but they can also subcontract or employ other people.

Can I use my personal bank account to run a sole proprietorship?

Although all profits go to the owner, taxes are paid once, and proprietors pay taxes individually. Now, you can decide with the given sole proprietorship examples whether a sole proprietorship is suitable for you or not. Let’s look into the world of sole proprietorship examples and explore real-world scenarios.

Eg:3>> The Local Carpenter

The name sole proprietorship acted as individual entrepreneurship, lone trader, or just proprietorship. Any type of business can be a sole proprietorship, including online businesses, home-based businesses, and service-based businesses. Whatever your passion or niche, a sole proprietorship provides a convenient way to get started on your entrepreneurial journey. Let’s take a closer look at 5 common businesses operated by sole proprietors. A sole proprietorship is best suited to small businesses with low risk and low profits. Generally, these businesses don’t have a wide range of customers but rather a small, dedicated group.