Sole Proprietorships

All the business’s assets, liabilities, and operations are a part of the owner’s personal financial situation. As the name indicates, there can only be one owner of the business, and no separate business entity exists. Because of that, for tax purposes, everything from the business (profits, losses, etc.) is passed through to the owner. The business doesn’t file its own taxes, and there are no papers to file to set up the business. The owner is also personally liable for his or her business and any legal action that may be taken against it. The best bet for a sole proprietor to help protect against any type of legal claim is to purchase commercial liability insurance. Although there is the advantage of being the only person in control of your business (i.e., no shareholders or partners to answer to), it also becomes a potentially huge liability when you consider that you are solely responsible both on the business front and personally.