A usual entity for new businesses refers to a sole proprietorship. A single enterprise is a business kind that rapidly becomes distinguished in the USA. A local proprietor usually prefers to settle an LLC or a sole venture than a corporation. Nevertheless, many owners that run small businesses sometimes confuse a sole proprietor’s position with rooted myths.

When an owner plans to launch a sole business, he only needs to implement the first steps as the government requires no registration for non-official businesses. Besides an LLC and a corporation, any informal entity is still responsible for the general regulations’ compliance.

An LLC, a corporation, and an entity set in the US should accept the unanimous business policy. It signifies that a sole proprietor should manage a legal business, regardless of its structure. 

We formed a review about the most popular – 6 sole proprietor’s myths. If you aspire to interact in the same position or feel curiosity about a sole proprietor’s activity, read this article till the end to stay aware of true and false facts.

A piece of advice. Before turning to a myth discussion, we would like to mention that an absence of limited liability protection isn’t a stereotype. Versus to an LLC and a corporation, a sole proprietorship doesn’t provide such a function. If you care about a legal defense, better think about forming an LLC. This business entity demands less paper routine and is more comfortable to lead. An LLC became preferable among small businesses in the last years. DIY or hiring an LLC service will bring more info.

Myth 1. I have to prepare documents to register a sole enterprise and become a proprietor

A sole proprietor is legal to get rid off of papers. A property assigns automatically when an owner introduces his entity. There is no need for sole businesses to apply to a business agency for incorporation. A sole proprietorship serves as a general partnership ruled by one owner. 

It’s convenient as a proprietor is free from anticipation, legal instruments preparation’s humdrum unlike an LLC, a corporation, and any other entity. Different businesses have to submit appropriate data to manage their activities. A sole proprietor still has permission to employ people and cooperate with business partners.

However, if an owner searches for his possession’s statements at the Secretary of State website, he won’t find them. The explanation of it hides in a factor that a sole proprietorship isn’t an official business type.

It didn’t pass the registration procedure, so there’s no formal data about it. So that, the amount of national and administrative audits of a sole venture’s formation and promotion is low. 

Being a sole proprietor is a fascinating business experiment for those who aren’t ego to spend much effort and check.

Myth 2. A sole business earmarks a proprietor and deprives a right to settle an LLC or a corporation

If you manage a single enterprise, it doesn’t mean you have no chance for another business. Joining the US business as a sole proprietor is beneficial for beginners. However, some owners soon recognize they want to achieve a new level. 

It’s possible to transfer from sole possessions or small businesses to an LLC or corporation. A reputation of a united proprietor doesn’t affect a further company formation or legal entity recruitment. History remembers plenty of corporations that interacted as sole proprietorships for a decade before reaching success.

If you plan to attract shareholders and obtain investments, you can transshape ownership into a corporation or an LLC. Implement the same task if you aim to reserve an unusual business title or protect private stocks. The last one preserves from a corporate veil piercing.

Myth 3. The state forbids a sole proprietor to hire workers

One person is legal to rule a sole proprietorship, but the government realizes the inability to handle issues alone. For that, the state allows attracting not only purchasers but also workers. After receiving a federal tax ID code or EIN, a sole business can easily hire employees.

We recommend recruiting people that don’t own businesses. If you are enthusiastic about business flourish with an ally, better form a corporation, an LLC, or any other entity. As we’ve already mentioned, you are always welcome to settle various business objects.

Myth 4. A sole proprietorship guarantees personal holdings’ security

In general, only businesses with a corporate veil, such as an LLC can rely on personal asset protection. A sole proprietorship doesn’t belong to this group. A corporate veil is a beneficial option that keeps personal and business assets separate and safe. If an owner violates regulations, he faces a corporate veil piercing and undermines his stocks’ security. If you prefer to establish a corporate veil – it’s reasonable to focus on businesses distinctive from a unified property.

A sole proprietor runs his business alone. There is no need to hide or insure holdings from members. An owner’s assets require no stocks defense. 

Myth 5. Personal and business stocks’ isolation actually makes no sense

If an LLC or a corporation neglects personal asset protection, it’ll cause many legal challenges. Such a danger doesn’t refer to a sole estate, unlike other business entities. However, as sole proprietors don’t manage any paperwork while launching businesses, they usually ignore an accounts department. Theoretically, as a united enterprise’s owner, you don’t need to isolate private and business stocks, but in practice, reassurance is never wrong. Keep bookkeeping in order never to gain legal troubles.

Divided business profiles help to discern the difference between a sole and business annual income. 

Having separated accounts saves from a tax and financial tangle and shows statistics of a proprietor and business losses and earnings.

The state’s revision won’t have any pretensions and will appreciate the accurate approach of a sole entity.

Myth 6. A sole proprietorship is likely to be a hobby than a serious business type

“Not registered” isn’t the same as “not being legal”. For sole estates, such an attitude sounds like disrespect, as sole proprietors effort to achieve boost and form a place in a business market not in a lower measure than LLCs or corporations. A sole enterprise is an adequate business structure, not entertainment.

As we noted above, several corporations were sole business entities before getting to the top. A good instance is eBay! It was an unknown sole proprietorship, but now it’s a famous company relevant to web auctions, online shops and trades specialized in utilized electronic commodities, and so on.

A sole proprietorship may not have such advanced advertisements or papers, but it’s still ego to grow and lead to success. The sole business entity brings much experience, confidence, and skills. Many great companies started as sole proprietorships and still function in the same type.


A sole proprietorship isn’t perfect as a business entity. It can’t provide essential advantages, such as private asset protection, and informality may sound suspicious.

A sole enterprise might look too simple for a multilevel business. But non-officiality doesn’t prevent it from a legal activity, and goods and services promotion.

We hope our article was productive and could remove uncertainty and confusion regardless of your aspiration to run an LLC, a corporation, or a sole business. We collected the most common myths that interrupt from becoming a sole proprietor. If you guess, forming an LLC is a better choice, Incfile or ZenBusiness are cheap online business platforms that offer quality and reliability. They’ll take responsibility for your LLC registration data. Hundreds of positive customer reviews prove that.

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