As sole owner of the assets, the sole proprietor is entitled to all of the profits of the business, but is personally responsible for all of its liabilities and obligations as well. There is no shield from liability other than insurance coverage.
The sole proprietorship is the simplest form of business organization. There are no legal formalities required to bring this form of business organization into being, and there are no particular formalities necessary for its operation.
The tax consequences affecting a sole proprietorship can be quite negative, because the proprietor’s taxable income includes all of the business’ profits, whether or not he or she takes out any or all of the profits of the business in the form of a distribution or reinvests all of the profits in business expansion. On the other hand, a sole proprietorship can be a welcome source of tax losses to an otherwise high-bracket taxpayer.