Pros and cons of a sole proprietorship

A sole proprietorship is a business owned by one person — the sole proprietor — and is unincorporated. This is the oldest, simplest and most common form of organization for a company.

Features of a sole proprietorship

Here are some of the key features of a sole proprietorship:

  • As the business owner, you own all assets, earnings, and profits.
  • You also hold all the responsibilities (including legal and debt), obligations and liabilities.
  • If you establish a business in your own name, without adding any other words, it’s not necessary to register the business.
  • You can choose to either bill customers in your name, or register a business name and bill customers in the registered business name, which must have a separate bank account.
  • The law doesn’t distinguish between the business and its owner, and personal income tax must be paid on all revenue generated by your business. If your revenues are more than $30,000, or if you have legal ownership of more than one business, you must register for GST/HST (one registration will cover all businesses).

Pros and cons of sole proprietorship

Let’s take a look at some of the pros and cons of this type of ownership.


  • Least expensive form of ownership, low start-up costs.
  • Most freedom from regulation.
  • Simple to start and dissolve.
  • Complete control over the company and decisions.
  • Least working capital required.
  • Complete control over the income generated by the business.
  • Complete access to profits.
  • Easier to offset losses against other income.
  • Flexibility.
  • Easiest to exit.


  • Business owner is legally responsible for all debts.
  • Unlimited liability (not separate by law; can be personally liable for all debts even if it means paying debts with your personal assets).
  • Business can’t continue in absence of owner.
  • Harder to raise funds from personal savings or loans.
  • Higher personal tax rate.
  • Often harder to find high quality employees.
  • Limited resources and opportunities for growth.
  • Some employee benefits are not deductible from business income.
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