Often when business owners start a business, they start out as sole proprietors. As a sole proprietor, the owner is the operator of the business. Many artisans and self-contractors operate their businesses as sole proprietorships because they are easy to set up. They owners use their own social security number to pay taxes. Sole proprietors often do not delegate their duties and they do not have to set up a trade name in order to operate the business.
Examples of sole proprietorships are hair dressers, landscapers, artists, designers, and daycare. These workers typically make under $100,000 per year and do all the work themselves. The business owner would be responsible for all debts and he/she alone receives all of the profits. They only disadvantage of the sole proprietorship is that he/she would have difficulty receiving funding or a business line of credit from a bank.
In order to qualify for funding, a business owner must change to another form of organization, such as a corporation, S- corporation, LLC, or partnership, which would give him more potential for profits.