Sole Proprietorship

Advantages of a Sole Proprietorship
  • Easiest and least expensive form of ownership to organize
  • Sole proprietors are in complete control, and within the parameters of the law, may make decisions as they see fit.
  • Sole proprietors receive all income generated by the business to keep or reinvest
  • Profits from the business flow-through directly to the owner's personal tax return
  • The business is easy to dissolve, if desired
  • Business registration with the State of Hawaii Department of Commerce & Consumer Affairs is not required, unless public notice of trade name is desired.

Disadvantages of Sole Proprietorship
  • Sole proprietors have unlimited liability and are legally responsible for all debts against the business; Their business and personal assets are at risk.
  • May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans
  • May have a hard time attracting high-caliber employees, or those that are motivated by the opportunity to own a part of the business
  • Legal life ends with owner’s death Owner’s salary cannot be treated as expense; hence, not tax deductible