A sole proprietorship is limited to a single person owner.
It is the easiest business to form and does not require any filings with the State Corporation Commission (SCC). However, some sole proprietorships file a fictitious business name statement with the SCC and county clerk. This might make their business more attractive to potential clients.
There is no need to prepare an annual information tax return. All business profits and losses are reported on the owner's personal income tax return. Owners are liable for profits even if they are reinvested back into the business.
The single owner is personally liable for business debts and lawsuits. Though some of this risk may be mitigated by commercial business insurance, owners remain vulnerable. A sole proprietorship may be appropriate when a small business has a very low risk of defaulting on debts or physically or financially injuring people and other businesses.