Proprietorship

Proprietorship is a type of business structure where a single individual owns and operates the entire business. This person, the proprietor, is personally liable for all business debts and obligations. The business's profits are taxed as the proprietor's personal income, offering simplicity in setup and management. This structure is common for small businesses, offering ease of formation and complete control, but it also carries the highest risk due to unlimited liability. Key advantages include direct control and ease of setup. Disadvantages include unlimited liability and difficulty raising capital. The legal separation between the business and owner is blurred.

Proprietorship meaning with examples

• After years of working as a freelance graphic designer, Sarah decided to formalize her business as a proprietorship, simplifying her taxes and allowing her to invest her profits directly into marketing and equipment upgrades. This offered her complete control over her creative vision. The setup was relatively easy.
• The local bakery operated as a proprietorship for decades, with the owner personally managing all aspects from baking to sales. However, the business's growth potential was limited by the owner's ability to secure personal loans. Raising capital was difficult because of the structure.
• Initially, the online bookstore was operated as a proprietorship, meaning John, the owner, was responsible for all debts. He needed to take special caution to separate his business and personal finances to protect his assets and avoid any legal problems.
• Starting a consulting business, Mark established his proprietorship to have full ownership over his own time, working practices and earnings, a simple legal structure and a transparent tax reporting system. The simplicity and direct control were very important to him for his personal working style.