ENTREPRENEURS SHOULD AVOID SOLE PROPRIETORSHIPS
I recently came across an article which discussed the operation of a business as a sole proprietorship. The article correctly identifies the informality and ease with which a sole proprietorship can be formed as advantages of this form of business organization. In addition, it correctly recognizes the sole proprietor's exposure to personal liability as a disadvantage of this form of business organization.
What the article fails to address, however, is the vast extent of a sole proprietor's risk exposure and the ease with which an entrepreneur can form a limited liability entity to protect against this risk.
Legally, there is no distinction between a sole proprietor and his or her business. This means that a sole proprietor's personal assets (e.g., real estate, car, boat) can be taken by business creditors to satisfy business debts and liabilities. However, an entrepreneur does not have to assume this risk.
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