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( December 2013 ) This article is part of a series on Corporate law By jurisdiction Anguilla Australia BVI Canada Cayman Islands India South Africa United States Vietnam European Union France Germany United Kingdom General corporate forms Company Conglomerate Cooperative Corporation Holding company Joint - stock Partnership General Limited Limited liability Private limited Sole proprietorship Corporate forms by jurisdiction European Union Societas ( SE ) Societas cooperativa ( SCE ) Societas privata ( SPE ) Societas unius personae ( SUP ) Economic interest grouping ( EEIG ) UK / Ireland / Commonwealth Charitable incorporated organisation ( CIO ) Community interest company ( CIC ) Industrial and provident society ( IPS ) Limited company ( Ltd. ) by guarantee by shares proprietary public Unlimited company United States Benefit corporation C corporation Limited liability company ( LLC ) Low - profit LLC Series LLC Limited liability limited partnership ( LLLP ) S corporation Delaware corporation / statutory trust Massachusetts business trust Nevada corporation Others Aktiebolag ( AB ) Aktiengesellschaft ( AG ) Ansvarlig selskap ( ANS ) Aktieselskab ( A / S ) Aksjeselskap ( AS ) Gesellschaft mit beschränkter Haftung ( GmbH ) Kabushiki gaisha ( K.K. ) Naamloze vennootschap ( N.V. ) Osakeyhtiö ( Oy ) S.A. Société à responsabilité limitée ( SARL ) more... Doctrines Business judgment rule Corporate governance De facto and estoppel corporations Internal affairs doctrine Limited liability Piercing the corporate veil Rochdale Principles Ultra vires Related areas Civil procedure Contract Corporate registers Company portal Law portal A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of enterprise that is owned and run by one natural person and in which there is no legal distinction between the owner and the business entity. The owner is in direct control of all elements and is legally accountable for the finances of such business and this may include debts, loans, loss, etc. The sole trader receives all profits ( subject to taxation specific to the business ) and has unlimited responsibility for all losses and debts. Every asset of the business is owned by the proprietor and all debts of the business are the proprietor 's. It is a `` sole '' proprietorship in contrast with partnerships ( which have at least two owners ). A sole proprietor may use a trade name or business name other than his, her, or its legal name. They may have to legally trademark their business name if it differs from their own legal name, the process varying depending upon country of residence. Contents 1 Advantages and disadvantages 2 Foundation and development 3 Finances 3.1 United States 4 Rules for sole proprietorships in different countries 4.1 Malaysia 4.1. 1 Registration of Sole Proprietorships 4.1. 2 Goods and Services Tax ( GST ) 4.1. 3 Sole Proprietors as Employers 4.1. 4 Online Businesses 4.2 United Kingdom 4.2. 1 Advantages 4.2. 2 Disadvantages 4.3 United States 4.4 Other countries 5 References 6 External links Advantages and disadvantages Registration of a business name for a sole proprietor is generally uncomplicated, unless it involves the selection of a name that is fictitious, or `` assumed. '' The business owner is required to register with the appropriate local authorities, who will determine that the name submitted is not duplicated by another business entity. Furthermore, the business owner must complete a form submitted to the governing authority to acquire title as a `` DBA '' or `` doing business as ''. The authority in some states is the Secretary of State. The license for a sole proprietary business entitles the owner to hire employees and enlist the services of independent consultants. Although an employee or consultant may be requested by the owner to complete a specific project or participate in the company 's decision - making process, their contribution to the project or decision is considered a recommendation under the law. Under the legal doctrine Respondeat superior ( Latin : `` let the master answer '' ), the legal liability for any business decision arising from such a contribution remains upon the owner and can not be renounced or apportioned. This is transposed by the unlimited liability attached to a sole proprietary business. The owner carries the financial responsibility for all debts and / or losses suffered by the business, to the extent of using personal or other assets, to discharge any outstanding liabilities. The owner is exclusively liable for all business activities conducted by the sole proprietorship and accordingly, entitled to full control and all earnings associated with it. The general aspect according to general business law is that this type of business ownership does not embody a `` legal entity '' Furthermore, any attempted and unreliable distinctions of the business do not change the classification under this title. Foundation and development The setting - up process of a sole proprietorship to comply with local laws and regulations, is obtainable from the Small Business Development Center ( SBDC ), using their locator facility. A sole proprietor must be prepared to devote their time, utilizing business methods towards establishing a sound and appropriate foundation. Doing so may contribute to increased turnover, profits, minimize taxes, and avoid other potential adversities. Sole owners are engaged in many varieties of industry and commerce and a comprehensive list of the primary categories, is found in the North American Industry Classification System ( NAICS ). The selection of a business type by a new sole proprietor is in many instances, motivated by appropriate business experience in a particular field, especially those pertaining to enterprises involving the marketing and selling of defined products and services. A crucial component of a sole proprietorship within a business plan is the provision of an inherent guideline, for actions that require implementing for a business to achieve growth. The business name and products are critical aspects in the founding of a sole proprietorship and once selected, should be protected. In the event of a determined brand name being legalized, information regarding trademark protection is available from the U.S. Patent and Trademark Office. Finances For the sole proprietor there are a variety of options in obtaining financial support for their business, including loan facilities available from the U.S. Small Business Administration. The loans are not originated by the SBA, but the administration does guarantee loans made by various independent lending institutions. The primary loan facility for small businesses offered by this agency is the 7 ( a ) loan program, designed for general applications. Sole proprietors are able to finance legitimate operating expenses ; for example, working capital, furniture, leasehold improvements and building renovations. Many and varied private organizations and individuals seek opportunities to invest and fund a business that may not qualify for traditional financing from institutions, such as banks. For the sole proprietor, seeking to take advantage of this facility, there are various factors that must be understood and adhered to regarding the loan application. United states The Small Business Administration ( SBA ) advises there are traditionally two forms of financing : debt and equity. For any small business owner seeking funding, they must consider the debt - to - equity ratio of their enterprise. This means the inter-action between the sum of dollars borrowed and the financial dollars invested in the business. The mathematics are simple ; greater the finance invested by sole proprietors in their business ; easier the obtaining of finance ! The SBA statistics show that the majority of small enterprises favor the use of limited equity financing ; for example, friends and relatives. According to the SBA, there are various private organizations prepared to fund sole proprietor business operations that do not qualify for traditional financing from banks. These private investors can provide loans, credit lines, leasing facilities for equipment, or other forms of capital, to sole proprietorship that have exhausted alternative financial resources. It is also possible for these owners to obtain financing by way of business partners or others, with cash to invest. Financial partners are frequently `` silent '' and although they do not participate in any business related decisions, they generally receive a percentage of the profits, generated by the business. To assist sole proprietors, there are business grants available from the Federal Government or private organizations, providing certain criteria are met. To qualify for Federal grants, small businesses must comply with determined business size and income standards. For consideration regarding various grant opportunities, sole proprietors may apply for a grant in their capacity as an individual. Local governments and state economic development agencies, frequently make grants available, for businesses that stimulate their local economies. For any sole proprietor applying for a loan, before starting the loan procedure, it is essential their personal and business credit history is in order and up - to - date. A personal credit report should be obtained from a credit bureau ; for example, Trans - Union, Equifax or Experian. This action should be initiated by a business owner well before starting the borrowing process. The Small Business Administration specifies that all credit reports received from any source should be carefully reviewed to ensure that all relevant personal information is correct. Other content in the report should also be examined particularly that related to the past credit obtained, from sources such as, credit cards, mortgages, student loans, as well as details pertaining to how the credit was repaid. Rules for sole Proprietorships in different countries Malaysia Registration of sole Proprietorships In Malaysia, there are three different laws governing the registration and administration of sole proprietors : - West Malaysia & the Federal Territory of Labuan : Registration of Business Act 1956 ( Act 197 ) ; Sarawak : Businesses, Professions and Trade Licensing Ordinance ( Sarawak Chapter 33 ) & Business Names Ordinance for the State of Sarawak ( Sarawak Chapter 64 ) ; and Sabah : Trades Licensing Ordinance for the State of Sabah ( Sabah Chapter 144 ). In West Malaysia, the registration of sole proprietors come under the purview of the Companies Commission of Malaysia ( Suruhanjaya Syarikat Malaysia, or abbreviated as SSM ). In Sabah and Sarawak ( with the exception of Kuching ), the registration of businesses are done at the local authorities ( e.g. municipal councils or district offices ) while in Kuching, sole proprietors are registered with the Kuching Office of the Malaysian Inland Revenue Board. Sole proprietors, which includes the self - employed, must register with the relevant authority within thirty ( 30 ) days from the commencement of their business. Sole proprietors may register their business using one of two names : ( 1 ) their legal name following the registrant 's identity card or ( 2 ) a trade name. Registration of a business lasts either one or two years, and must be renewed thirty ( 30 ) days before its expiry. In the event of termination of business, the proprietor has thirty ( 30 ) days from the termination date to file the notice with the relevant authority. If the termination is caused by the death of the proprietor, the administrators of the estate has four ( 4 ) months from the death date to file a notice of termination. Goods and services tax ( GST ) Sole proprietors must register with the Royal Malaysian Customs Department to charge and collect goods and services tax ( GST ) once their taxable turnover within a 12 month - period exceeds RM500, 000. Sole Proprietors as Employers Similar to other Common Law jurisdiction, proprietors may enter into contracts of employment and / or apprenticeship with their employees. Sole proprietors, as employers, are responsible to : - Make contribution to their employees ' Employees Provident Fund ; and Pay contribution to their employees ' Social Security. Online businesses In 2016, the SSM took legal action against 478 online businesses who fail to register their businesses whether as sole proprietors, partnerships, or private limited companies. As at May 12th, 2017, a total of 50,882 online businesses have registered with the SSM since 2015. United kingdom A sole trader is the simplest type of business structure defined in UK law. It refers to an individual who owns their own business and retains all the profits from it. When starting up, sole traders must complete a straightforward registration with HM Revenue and Customs as self - employed for tax and National Insurance purposes. They are responsible for maintaining the businesses records and submitting an annual Tax return for all income from self - employment and other work. In Britain, anyone who begins work for themselves is considered by the Government to be a self - employed sole trader, regardless of whether or not they have advised HM Revenue and Customs. A sole trader can keep all the profits of their business after tax has been paid. They must lodge a self - assessment tax return each year, and pay Income Tax as well as National Insurance. If revenue is expected to be more than £ 83,000 a year, they must also register for the Value Added Tax. A sole trader can employ staff, but is personally responsible for any losses the business makes. Advantages Becoming a sole trader is relatively simple compared to other business structures. It can rapidly enable a business to begin trading ; the requirements for record keeping are far more straightforward than other business structures. Sole traders make all operational decisions and are solely responsible for raising business finance. They can invest their own capital into the business, or may be able to access business loans and / or overdrafts. Unlike limited companies or partnerships, it is not necessary to share decision making or the profits. Disadvantages The simplicity of this structure also has its limitations. Unlike forming a limited company, it lacks the clear cut definition between personal and business income from the perspective of the tax authorities. The business owner is personally liable for income tax and National Insurance contributions due for the business profits in each given tax year. They are also personally liable for any debts the business incurs. Business analysts may advise sole traders to form a limited company in order to access greater levels of financing, for example for expansion plans. This can limit their personal liability ; business lenders may be more inclined to co-operate with a limited company. It can also be the case that within certain industries it is easier to secure work if presenting potential business partners with a limited company structure. United states In the United States there are no formalities that must be followed to start a sole proprietorship or commence business as a sole proprietor. However, depending upon the business activity of the sole proprietorship, sole proprietors may require licenses and permits in order to conduct business. According to the Small Business Administration ( SBA ) a sole proprietor and their business are considered as one and the same ; therefore, the business is not subjected to separate taxation and regarded as the direct income of the owner. Income, losses and expenses may be listed on a Schedule C, which is then transferred to the personal tax return of the owner. It is the responsibility of the owner to ensure all due income taxes and self - employment contributions are paid. A permitted exception to the sole proprietor ( single owner ) stipulation is made by the Internal Revenue Service ( IRS ) permitting the spouse of a sole proprietor to work for the business. They are not classified as partners in the enterprise, or an independent contractor, enabling the business to retain its sole proprietorship status and not be required to submit a partnership income tax return. Other countries An exact translation of `` sole proprietorship '' is unusual, because the focus of the concept can change. An example is the Brazilian concept of `` sole business '' that was split into two main kinds of formal freelancer : sole professional : with higher level academic certificate and regulations for formal control of autonomous exercise ( ex. sole doctor 's office ). sole entrepreneur : typical `` little entrepreneurs '', as sole craftsman, autonomous taxi driver, and many others, that can be formal. An informal freelancer, through a simple process, can be formalized as sole microentrepreneur German and Austrian tax law also differentiates between sole professionals and other sole proprietors References Jump up ^ `` Small Business.gov.au - How do I register my business name ? ''. Retrieved 2015 - 07 - 13. Jump up ^ Weltman, Barbara ( 2011 ). J.K. Lasser 's Small Business Taxes 2011 : Your Complete Guide to a Better. Wiley. ISBN 0470939575. Retrieved 26 January 2018. Jump up ^ `` 7 ( a ) Loan Program ''. SBA.gov. Retrieved 11 December 2014. Jump up ^ `` The SBA Loan Guarantee Program '' ( PDF ). Small Business Administration. October 2011. Retrieved 26 January 2018. Jump up ^ `` Sole Proprietorship Loan Programs ''. SBA.gov. Retrieved 11 December 2014. Jump up ^ `` Registration of Business Act 1956 ''. Companies Commission of Malaysia. Retrieved 2018 - 01 - 16. Jump up ^ `` Business, Profession and Trade Licensing Ordinance ( Sarawak Chapter 33 ) ''. Betong Division Website. Retrieved 16 January 2018. Jump up ^ `` Sarawak Business Names Ordinance ''. Betong Division Website. Retrieved 16 January 2018. Jump up ^ `` Trades Licensing Ordinance ( Sabah Chapter 144 ) '' ( PDF ). Sabah State Attorney - General 's Chambers. ^ Jump up to : `` Responsibility of Business Owner '' ( PDF ). Companies Commission of Malaysia. Retrieved 16 January 2018. Jump up ^ `` Starting a Sole Proprietorship / Partnership ''. Companies Commission of Malaysia. Retrieved 16 January 2018. Jump up ^ `` Getting Ready for GST -- Registering for GST '' ( PDF ). Royal Malaysian Customs Department. Retrieved 16 January 2018. Jump up ^ `` EPF - Employers - KWSP ''. www.kwsp.gov.my ( in Malay ). Retrieved 2018 - 01 - 16. Jump up ^ User, Super. `` Employer & Employee Eligibility ''. www.perkeso.gov.my. Retrieved 2018 - 01 - 16. Jump up ^ `` SSM : Unregistered businesses can not sell products online - Nation The Star Online ''. www.thestar.com.my. Retrieved 2018 - 01 - 16. Jump up ^ `` 50882 peniaga online berdaftar dengan SSM ''. www.astroawani.com ( in Malay ). Retrieved 2018 - 01 - 16. Jump up ^ HMRC, First Steps To Register As Self - Employed Jump up ^ Business Link, Legal Structures : The Basics - Sole Trader Jump up ^ `` Choose a legal structure for your business ''. GOV.UK. 1 April 2015. Retrieved 7 July 2015. Jump up ^ `` Set up as a sole trader ''. gov.uk. Crown. Jump up ^ Larson, Aaron ( 7 July 2016 ). `` The Sole Proprietorship ''. ExpertLaw. Retrieved 26 January 2018. Jump up ^ Carter, Christopher. `` What Are the Registration Requirements & Procedures for Sole Proprietorship ? ''. Chron. Texas Chronicle. Retrieved 26 January 2018. Jump up ^ `` Sole Proprietorships ''. IRS. Internal Revenue Service. 14 December 2017. Retrieved 26 January 2018. Jump up ^ `` Husband and Wife Business ''. Internal Revenue Service. irs.gov. Retrieved 8 September 2016. External links Sole Proprietorship, entrepreneur.com Retrieved from `` https://en.wikipedia.org/w/index.php?title=Sole_proprietorship&oldid=837254147 '' Categories : Business terms Business law Types of business entity Hidden categories : CS1 Malay - language sources ( ms ) Articles with limited geographic scope from July 2015 Articles needing additional references from December 2013 All articles needing additional references Articles with multiple maintenance issues All articles with unsourced statements Articles with unsourced statements from July 2012 Talk Contents About Wikipedia Afrikaans বাংলা Беларуская ( тарашкевіца ) ‎ Български Dansk Español فارسی Français 한국어 Հայերեն हिन्दी עברית ಕನ್ನಡ Lietuvių Magyar മലയാളം Nederlands नेपाली 日本 語 Norsk Norsk nynorsk Papiamentu Polski Português Русский Slovenčina Suomi Svenska தமிழ் Türkçe Українська 中文 23 more Edit links This page was last edited on 19 April 2018, at 17 : 29. 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Question: who makes the decisions in a sole proprietorship
Answer: The owner