If you started a business by yourself and never incorporated, i.e. failed to submit paperwork to your state agency to establish your business, you likely created a sole proprietorship. Sole proprietorships start up all the time – often without the owners even knowing that they’ve created one. However, most people that know even a little bit about business law generally stay away from creating sole proprietorships.

While sole proprietorships are easy to create, there are many drawbacks associated with sole proprietorships including personal liability for all acts and/or omissions of the business. (Note: You may have insurance that or other avenues that limit your liability.) Therefore, it’s often better to operate as a limited liability company or possibly even a corporation if you are the only owner of the business. However, once you bring on another owner (i.e. another partner), to your business you automatically cease operating as a sole proprietorship.

In this article, we’ll take a general look at how sole proprietorships often begin, talk about some "advantages" and "disadvantages" of being a sole proprietor, and go over some business formalities to be aware of for sole proprietorships.

Next, we’ll take a brief look at how sole proprietorships often start.