Sole proprietorship refers to a type of business structure which is organized and run by a single person. This person is responsible for all the decision making, and is entitled to all the profits. Sole proprietorship is a legal business structure recognized by law and it has been in existence for ages. The organization of the structure needs not be very formal, is not defined by any set rules and regulations, neither does it have a great deal of exposure to liability.
Any individual who wishes to start a small business but is limited in terms of capital can consider starting a sole proprietorship. This type of business does not call for millions of dollars to start up. Many small businesses with this organization structure do not require any formal procedures for starting up, unless they have anything to do with public health. Licensing is not hard to acquire and neither does it cost much.
Sole proprietorships have the same entity as the owner. They are considered to be one and the same thing. This is to say that the debts that the business accrues should be absorbed by the owner. Any legal action that is taken against the business enterprise is handled by the business owner. This type of business structure comes with its own advantages and disadvantages, which are all faced by the owner on their own. One advantage is that all profits go to the owner alone. Decisions are also dependent on the owner and getting to a conclusion does not take a very long time.
However, this is a disadvantage because, the owner only makes decisions based on what he knows, which might be a little bit limiting and hence, may not give the best results. One other major disadvantage is that, since the owner runs the enterprise all alone, he may spend limitless time responding to client issues that could otherwise be handled by someone else while he concentrates on more business growth oriented issues.