The year end is quickly approaching and this is the time that entrepreneurs are trying to get their affairs in order for the beginning of the next year.

The next few articles are intended to familiarize you with the most popular business entities and enable you to make a more informed decision at which type of entity is best suited for your specific business.

This week we will start with the Sole Proprietor and then continue on in future related articles with the Partnership, Limited Liability Company (LLC) and the Corporation (S & C).

The sole proprietorship is a one-owner business. This type of business is what people think of as the “mom and pop” or a home-based business, though it does not have to be run out of the home. The owner has the sole right to manage the business, solely entitled to the profits (and losses) and is unlimitedly responsible for the debts of the business.

This is the easiest business form to establish, in fact, most sole proprietorships start small and their initial jobs are usually commissioned on a hand-shake. Essentially, you just hang out your shingle and you have established a business. Other steps may be required by your particular state and locality, such as registering a fictitious business name (a name other than your own personal name), registering for a business license or maybe obtaining a sales tax license.

On the up-side this is the easiest business entity to form but on the down-side it is the one with the most potential for personal loss. The owner, who usually runs the business, is personally liable for all business debts, taxes and whatever other liabilities that may come up for the business. Personal assets, such as, cash in bank accounts, equity in a home or car, or personal investments, can be used to satisfy a court judgment that may be entered against the business. The owner is also personally liable for its employees while they are acting in the course and scope of their employment.

Can’t forget to mention that filing taxes for a sole proprietorship is easy. All profits and losses are reported on the personal income tax return of the owner (Schedule C, Profit or Loss From Business).

When contemplating this type of entity just keep in mind that while it is easy to start there is no limited liability and the personal loss may be greater than you are willing to take.

Jody Fortuna and Michael Schiller own Incorporating Services, Inc., a business that professionally forms corporations and limited liability companies (LLCs) for small business. Jody also presents workshops with SCORE, she is committed to helping entrepreneurs, small business owners learn about incorporating, and the benefits, as well as helping them easily and affordably undertake this important business step without sacrificing quality. For more information, go to IncorporatingSvc.com, call 427-5175 or e-mail Jody@IncorporatingSvc.com.