Over 70 percent of businesses in the United States are sole proprietorships as of 2013. A sole proprietorship is a type of business that is owned and run by a single person, though it may have multiple employees.
A sole proprietorship is the easiest business type to form, requiring only that the owner obtain any legally required licenses, permits or registrations for the sort of business being run. Many small businesses operate as sole proprietorships, including consultants, freelancers and independent contractors. As a sole proprietor, the owner is entitled to 100 percent of the profits of the business. The owner is also obligated for 100 percent of the company's losses as well, which can be taken from the owner's personal assets if necessary.
As a sole proprietor, paperwork for doing business tends to be less in comparison to partnerships or incorporated businesses. This includes paying both state and federal income taxes. A sole proprietorship is also more flexible and able to adjust to business changes faster, due to having fewer people to consult. A lack of paperwork also serves as a disadvantage, as many sole proprietors keep fewer records, which makes budgeting and finance operations more difficult. Banks are also less likely to extend financing to sole proprietors.