Everything You Need To Know About Starting A California Sole Proprietorship

A sole proprietorship is the simplest and least expensive, at least in terms of initial startup costs, type of business form to start. If you are an individual involved in a for-profit business, are the sole-owner and decision-maker of the business, then you are automatically considered a Sole Proprietorship. A sole proprietorship business form appeals to individuals starting a new business that is intended to remain small, does not involve great exposure to personal liability, and does not warrant the expense of incorporation nor the ongoing expense of corporate formalities. Often times, professionals such as doctors, lawyers, architects, and accountants may operate as sole proprietors in the early years of their practice to avoid the expense and formalities associated with other business forms. While sole proprietorships require there only be a single owner/decision maker of the business, a husband and wife can generally conduct business jointly and hold joint title to business assets in both names and still come within the definition of a sole proprietorship. See, CaliforniaCorp. Code § 16202(c)(1). Nontax Considerations In a sole proprietorship, the owner is personally liable for the obligations and liabilities of the business, even in excess of the amount invested. Thus, as a sole proprietor both your business and personal assets are at risk. Even if you have insurance, you may still be personally liable for business debts if claims are in excess of your policy limits. Because of the unlimited personal liability associated with Sole Proprietorships, individuals with substantial net worth who are involved in businesses that deal with hazardous materials, products, or are otherwise likely to [...]