sole proprietorship


Legal Status

As the name implies, the sole proprietorship is a business owned and operated by a single owner. Of the business forms available, it is the cheapest and easiest to form. Though there is no requirement to file formal documents with the Arizona Corporation Commission or Secretary of State, as there are for limited liability companies (LLC), limited partnerships, and corporations, there are some formalities that sole proprietors, and all other business forms, must adhere to. These include obtaining business licenses, complying with zoning ordinances, and meeting all reporting requirements if your business is regulated by the state or local government. To learn more about requirements for your business, contact a business attorney.


The significant advantage of the sole proprietorship is that all management and decision making authority is vested in the sole proprietor. As the sole owner of the business, you decide how it is run. A single member LLC, however, offers the same advantage while also limiting your liability.

Profit and Loss

The sole proprietor keeps 100% of the profits as the fruit of his/her labor. On the down side, the sole proprietor is personally liable for all debts and liabilities of the business, meaning the sole proprietor’s savings account and possibly house can be at stake. This is unlike a single member LLC where the sole member keeps 100% of the profits but is shielded from liability for the company’s debts and liabilities. The sole proprietor must also pay the entire FICA payroll tax on his/her earnings. For more information on how the business form you choose impacts your profit and loss, contact a business attorney.

Termination of the Sole Proprietorship

Because the sole proprietorship is not recognized as an entity separate and distinct from its owner, the sole proprietorship terminates when the owner dies. This can make it more difficult to obtain financing for the sole proprietorship than for other business forms. If you want your business to have a perpetual existence, contact a business attorney to learn how.