Sole proprietorships are a popular business structure because they are simple to set up and have few state filing and tax requirements. Entrepreneurs create sole proprietorships for a variety of businesses ranging from construction to retail to professional services. In many states, there is no filing requirement to set up a sole proprietorship.
Sole Proprietorship Basics
A sole proprietorship in many respects is like any other business entity that sells goods or services, such as a clothing store, doctor's practice or hair salon. But not all sole proprietors own companies; some are independent contractors, self-employed freelancers or consultants. Sole proprietors in these categories may work out of their homes and often receive income from several different clients or businesses. By accepting payment for goods or services as an individual outside of an employer/employee arrangement, you automatically create a sole proprietorship.
A large number of sole proprietorships offer professional, scientific and technical services. Sole proprietors in this category require a high degree of expertise and training; frequently, these individuals must obtain state licenses. Professional services include legal, accounting, engineering, computer, research, translation and veterinary services to name a few.
Another common business endeavor for sole proprietors is construction. Many construction workers are not employees of another business but instead freelance as sole proprietors. Construction includes activities related to building various types of structures as well as other projects, such as constructing highways and utility systems. Sole proprietors in this category may include general contractors, who are responsible for all aspects of individual construction projects, or specialty trade contractors who work on a specific facet of a project, such as plumbing or electrical wiring. A construction worker may also work as an operative builder, assisting in site acquisition and helping to secure financial backing for the project.
Real Estate and Leasing
Real estate agents and landlords constitute another large segment of sole proprietors. These include individuals who lease apartments or equipment. Likewise, many real estate agents who sell homes and other properties are not employees of another business but instead work as sole proprietors.
Individuals involved in agriculture are often sole proprietors. For example, those who own farms, ranches, nurseries and orchards commonly operate their businesses as sole proprietorships. This may include individuals who engage in complete farming operations as well as those who provide agricultural support for agricultural activities, such as soil preparation and harvesting.