A Sole Proprietorship is the simplest form of business organization in which an individual engages in business personally and without co owners or the use of an entity.
The biggest drawback of operating in this format is that the owner is personally liable for the debts and obligations of the business as well as his own personal obligations, separate and apart from the business.
Licensing requirements are usually minimal and are usually in the form of a City Business License and a fictitious name filing in the event the owner is not doing business under his individual name.
Upon the termination of a Sole Proprietorship the business ceases to exist but the owner remains responsible for paying off the debts of the business. There is a possibility of a sale of the assets and liabilities from the Sole Proprietor to another individual or entity in which event the seller would be trying to have the buyer of the assets take all of the assets along with all of the liabilities.
With reference to taxation, the owner files a schedule C along with his personal tax return for his / her ‘reasonable and necessary’ costs and expenses of doing business. Tax liabilities of the ‘business’ are tax liabilities of the owner. Thus, there is no separation of ‘Church’ and ‘State’.
In sum there is no tax advantage to being a Sole Proprietor; there is no organizational benefit to being a Sole Proprietor, and there is complete liability for all business debts by the same person who owns the business. Thus, if the business incurs large debts, and there are no assets with which to pay those debts, then the owner will have to go into his / her own personal assets to satisfy the debts of the business.