Operating a business as a sole proprietorship is an easy, inexpensive way to start a business, but the sole proprietor is subjected to the following risks and disadvantages:

• Unlimited personal liability against claims from lawsuits and creditors against the sole proprietor;

• Business liabilities discharged only through the personal bankruptcy of the sole proprietor;

• Raising capital from investors is not allowed; all funds must be contributed or borrowed by the sole proprietor; and

• All net income is subject to SECA self-employment taxes in addition to federal and state income taxes.