A sole proprietorship is a business owned and operated by one individual. It is the easiest business type to form, requiring no formal establishment, though licenses may be needed. The sole proprietor owns all profits and assumes all losses and liabilities of the business. Upon the owner's death, the business ceases to exist. The sole proprietor reports business income and expenses on personal tax returns using various forms like Schedule C.

1. Sole Proprietorship

2. Sole Proprietorship
• A sole proprietorship is a business established,
owned, and controlled by a single person.
• Sole proprietorships come in all shapes and sizes.
• The owner realizes all the profits and assumes
responsibility for all losses.
• The sole proprietorship is the most prominent of the
four forms of ownership.

3. Sole Proprietorship

4. Formation
• Of the four forms of ownership, the sole
proprietorship is by far the easiest to form.
• The government exercises very little control over the
establishment of new sole proprietorships.
• Start-up can be immediate and simple.
• You may need to obtain licenses or permits for your
particular type of business.

5. Advantages
• Sole proprietorships are simple to start. No formal
action is required.
• A sole proprietorship may be started immediately.
• The owner has total control of all aspects of the
business.
• The owner receives all the profits.
• The business itself pays no income tax; the owner
pays income tax as an individual.

6. Disadvantages
• The owner has unlimited responsibility for losses,
debts, and other liabilities the business might develop.
• The owner must make all the decisions.
• The owner is the only person who can arrange
financing or capitalization.
• The existence of the business ends upon the owner’s
death.

7. Operation
• Sole proprietors make all the decisions regarding
the operation of the business.
• The assets of sole proprietors are not considered
legally separate from the assets of the business.
• Owners of sole proprietorships report business
income and expenses on their personal income tax
returns.

8. Federal Tax Forms
Partial list of tax forms
• Form 1040: Individual Income Tax Return
• Schedule C: Profit or Loss from Business
(or Schedule C-EZ)
• Schedule SE: Self-Employment Tax
• Form 1040-ES: Estimated Tax for Individuals
• Form 4562: Depreciation and Amortization
• Form 8829: Expenses for Business Use of Your
Home
• Employment Tax Forms