Define Sole Proprietorship

The sole proprietorship business is the easiest to set up and can be quite effective for small businesses or start-ups. While the pros of the sole proprietorship are that it is an easy entity to set and run, the cons generally are that the owner, the sole proprietor, is responsible for all debts and claims against the business. In today’s world, however, the reality is that small business owners to a high degree are responsible for all debts of the business anyway. For example, let’s say you start the ABC Company, run up a debt and fail at the business. You will be responsible for the debts incurred. If you set up an LLC or a C Corp. under the name ABC Company Corp., you will like still be responsible for the debt. If you set up a line of credit with a big bank for your new C Corporation, the bank doesn’t know whether or not you will be successful, so they want you, the individual, to be responsible for the debt and the credit card or line of credit account you receive will like have two names on it: The ABC Corporation and John Smith. You, John Smith, will be responsible for the dbt of this company.

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