If I were to ever own a business it would be a sole proprietorship type of business. However, at this point in my life I do not see myself as a business owner. I am not the adventurist type, nor am I a risk taker. I do not trust my fellow man enough to partner up and I have an overwhelming fear of failing. If I were younger and could of over-come these issues, I would have owned and operated a small accounting service. I would start out as a sole proprietorship type of business and see where the adventure took me as a business owner.

Advantages of a Sole Proprietorship
•Owners can establish a sole proprietorship instantly, easily and inexpensively.
•Sole proprietorships carry little, if any, ongoing formalities.
•A sole proprietor need not pay unemployment tax on himself or herself (although he or she must pay unemployment tax on employees).
•Owners may freely mix business or personal assets.

Disadvantages of a Sole Proprietorship
•Owners are subject to unlimited personal liability for the debts, losses and liabilities of the business.
•Owners cannot raise capital by selling an interest in the business.
•Sole proprietorships rarely survive the death or incapacity of their owners and so do not retain value.

The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts. A sole proprietorship can operate under the name of its owner or it can do business under a fictitious name. The fictitious name is simply a trade name--it does not create a legal entity separate from the sole proprietor owner.

The sole proprietorship is a popular business form due to its simplicity, ease of setup, and nominal cost. A sole proprietor need only register his or her name and secure local licenses, and the sole proprietor is ready for business. A distinct disadvantage, however, is that the owner of a sole proprietorship remains personally liable for all the business's debts. So, if a sole proprietor business runs into financial trouble, creditors can bring lawsuits against the business owner. If such suits are successful, the owner will have to pay the business debts with his or her own money.

The owner of a sole proprietorship typically signs contracts in his or her own name, because the sole proprietorship has no separate identity under the law. The sole proprietor owner will typically have customers write checks in the owner's name, even if the business uses a fictitious name. Sole proprietor owners can, and often do, commingle personal and business property and funds, something that partnerships, LLCs and corporations cannot do. Sole proprietorships often have their bank accounts in the name of the owner. Sole proprietors need not observe formalities such as voting and meetings associated with the more complex business forms. Sole proprietorships can bring lawsuits (and can be sued) using the name of the sole proprietor owner. Many businesses begin as sole proprietorships and graduate to more complex business forms as the business develops.

Because a sole proprietorship is indistinguishable from its owner, sole proprietorship taxation is quite simple. The income earned by a sole proprietorship is income earned by its owner. A sole proprietor reports the sole proprietorship income and/or losses and expenses by filling out and filing a Schedule C, along with the standard Form 1040. Your profits and losses are first recorded on a tax form called Schedule C, which is filed along with your 1040. Then the "bottom-line amount" from Schedule C is transferred to your personal tax return. This aspect is attractive because business losses you suffer may offset income earned from other sources.

Sole proprietors are personally liable for all debts of a sole proprietorship business. Let's examine this more closely because the potential liability can be alarming. For instance; assume that a sole proprietor borrows money to operate but the business loses its major customer, goes out of business, and is unable to repay the loan. The sole proprietor is liable for the amount of the loan, which can potentially consume all her personal assets.

An even worse scenario: the sole proprietor (or even one of her employees) is involved in a business-related accident in which someone is injured or killed. The resulting negligence case can be brought against the sole proprietor owner and against her personal assets, such as her bank account, her retirement accounts, and even her home.

If a sole proprietor is wronged by another party, he can bring a lawsuit in his own name. Conversely, if a corporation or LLC is wronged by another party, the entity must bring its claim under the name of the company.