Advantages and Disadvantages ofSole Proprietorship

Jim Dandy’s business is currently structured as a sole proprietorship. The sole proprietorship structure can possibly be very advantageous. Jim Dandy currently owns the entire business and receives all of the profits of his business. Therefore, this sole proprietorship structure is beneficial to Jim Dandy because his company consistently makes $250,000 to $300,000 net income per year. Another advantage that Jim Dandy receives as sole proprietor is full control over the entire entity and day-to-day operations. Lastly, as a sole proprietor, Jim Dandy’s profits will flow through to his personal taxable income. Jim Dandy’s is only taxed once on the total amount of his personal income plus business profits.
Although Jim Dandy’s current situation seems very advantageous, there are a few major disadvantages of the sole proprietorship structure. One disadvantage in particular is that once Jim Dandy dies, so will his business. A sole proprietorship’s life does not continue once the sole proprietor dies. Another disadvantage is that Jim Dandy is personally responsible for all of the financing...