Everything You Need to Know About Sole Proprietorships When Forming a Business
There are many different ways to form a business in the state of New Jersey. One of these includes a sole proprietorship. This is one of the simplest and most common structures that is chosen to start a business. This is because it is an unincorporated business that is owned and run by one person with no distinction between themselves and the business. They are entitled to all profits and responsible for all their debts, losses, and liabilities. Continue reading below to learn more.
How do I Form a Sole Proprietorship?
To form a sole proprietorship, you do not need to take any formal action. As long as you are the owner, this status automatically comes from your business activities. In fact, some people may own one without even realizing it. However, similar to other businesses, you must obtain the necessary licenses and permits. The regulations can vary depending on the industry and locality. If you wish to operate your business under a different name than your own, you may need to file a fictitious name that is original and not claimed by another business.
What are the Advantages and Disadvantages of a Sole Proprietorship?
Having a sole proprietorship comes with various advantages, including the following:
- It is easy and inexpensive to form
- You have complete control over all the decisions and are not required to consult with anyone but yourself when making changes
- Easy tax preparation, as the business is not taxed separately. The tax rates are also the lowest of business structures.
Like anything else, there are also certain disadvantages to a sole proprietorship. This can include the following:
- Unlimited personal liability. Due to no legal separation between you and your business, you can be held personally liable for the debts, obligations, and employee liabilities.
- It is often hard to raise money, as you cannot sell stock in the business. Banks are also hesitant to lend to sole proprietors.
- It can be a heavy burden to be responsible for the success and failure of your business on your own.
Contact our Firm
The Law Offices of Richard E. Novak, LLC has over 25 years of experience helping clients through tough times when they need it most. If you need assistance with any intellectual property, traffic violations, or business law matters, our firm is here to help. It is critical that you pick the right attorney who can protect your rights. Contact The Law Offices of Richard E. Novak, LLC for a consultation.