Advantages and Disadvantages of a Sole Proprietorship Business

Jack Woerner, Shawn Grimsley
  • Author
    Jack Woerner

    BA in Political Science with Emphasis on Social Studies Education at Brevard College, 6 years experience (2 years online) teaching Economics, Personal Finance, APUS Government and more. Certified Gifted/Talented Teacher.

  • Instructor
    Shawn Grimsley

    Shawn has a masters of public administration, JD, and a BA in political science.

Learn the definition of a proprietor, explore the advantages and disadvantages of a sole proprietorship, and see sole proprietorship business examples. Updated: 01/11/2022

Table of Contents


Sole Proprietorships

There are four main types of business ownership: Corporations, partnerships, limited liability companies or partnerships, and sole proprietorships. Corporations are usually the largest businesses out of all the other types, while sole proprietorship usually makes up the smallest. Corporations are large organizations formed under an incorporated charter where shareholders can own parts of the company. Partnerships can include two or more owners and can vary from equal partnerships to majority-minority partnership structures. Limited Liability Partnerships (LLP) and limited liability companies (LLC) are hybrid business structures of partners or sole proprietorship mixed with corporation characteristics for more legal protection.

Sole proprietorships are businesses owned and operated by one owner. Breaking down the phrase sole proprietorship is the key to defining proprietor. Sole means one or single person, and proprietor means some who has taken a risk to start a business. The word proprietor used to mean only people who owned property. During the rise of capitalism and free-market enterprise in the 19th and 20th centuries, proprietors became known to mean private property owners that also wished to establish a business. Today, sole proprietorship businesses are the most common type of businesses created and operated in the United States.

There is no distinction between the owner and the company in a sole proprietorship company since they are the same. This distinction helps define proprietor. The owner's identity and personality are directly connected with the business. A sole proprietorship can expand into other business structures too. For example, sole owners of a business can restructure their business under a limited liability company to allow for more asset protection. If a sole proprietorship business decides to expand and take on a second owner, it can become a partnership or a limited liability partnership. Married couples looking to start a business but do not want to involve other owners are also considered sole proprietorships.

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: The Basics of Partnerships: Types & Examples

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
Your next lesson will play in 10 seconds
  • 0:07 Sole Proprietorships
  • 0:27 Advantages
  • 1:38 Disadvantages
  • 2:53 Lesson Summary
Save Save Save

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Speed Speed

A common misconception in sole proprietorship businesses is that they are small. Several sole proprietorships are large organizations employing hundreds if not thousands of employees. This image is former Secretary of the Treasury Jack Lew touring a large family-owned asphalt manufacturing business.

sole proprietorship examples - big family-owned business

Sole Proprietorship Examples

There are numerous examples because of the abundance of sole proprietorship-ran businesses in the U.S. Below is a list of some commonly found sole proprietorship examples in businesses: (most of these businesses are in local areas and not national or even statewide entities)

  • Local grocery stores
  • Hardware stores
  • Mom and Pop diners (family-owned restaurants)
  • Clothing boutique
  • Bars and Liquor store
  • Hair salons
  • Fabric store and sewing shop
  • Pet store
  • Pharmacy

There are even some informal sole proprietorship examples that fall in the "unconventional" category like:

  • A kid's lemonade stand
  • Food trucks
  • Baby-sitting
  • U-pick farm produce
  • Farmer market or flea market stand

The classical vegetable or lemonade stand is a symbol of the ease that sole proprietorship can experience in the business. These are great ways to get kids involved at a young age in entrepreneurship and leadership skills

define proprietor - lemonade stand

It is important to note that businesses forming under sole proprietorships can still qualify for branding rights. That means an owner can create and trademark a unique business name and create marketing around the brand as their own that no one else can use.

Advantages of Sole Proprietorships

There are many advantages of sole proprietorship businesses. Many of the advantages of sole proprietorships are very attractive to entrepreneurs, enough to be the most popular business model.

To unlock this lesson you must be a Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use

Become a member and start learning now.
Become a Member  Back
What teachers are saying about
Try it now
Create an account to start this course today
Used by over 30 million students worldwide
Create an account