The fact that a business is owned by just one person does not necessarily mean that it is a sole proprietorship. The term sole proprietorship refers to the way a business is structured. Most sole proprietorships are operated by individuals who provide professional services that are not high-risk undertakings. Discover some examples of the types of businesses that commonly operate as sole proprietorships, and learn how to tell if a particular company is a sole proprietorship or not.
Common Sole Proprietorship Examples
A sole proprietorship is a popular business format among solopreneurs who are looking for a fast, easy, and affordable way to start a business, and who are not concerned about taking steps to limit their personal liability for the obligations of the business. Sole proprietors are self-employed small business owners who choose to do business without the structure or protection of a legally recognized business entity. Sole proprietorships often provide services like the ones listed below.
- Cake decorator
- Career coach
- Computer repairperson
- Direct sales company representatives
- Dog walker
- Food truck owner
- Freelance writer
- Freelance artist
- Freelance photographer
- Makeup artist
- Personal trainer
- Pet sitter
- Voiceover professional
Of course, not all such businesses are actually organized as sole proprietorships. Every business owner has to make an informed decision about how to organize their business. Solo entrepreneurs often choose to set up a limited liability company or corporation instead of working as a sole proprietor.
How to Tell If a Company Is a Sole Proprietorship
Since sole proprietorships don't have legal status as a business entity, you can generally tell if a company is a sole proprietorship or not by searching state business entity records. These records can be found on the website for the Secretary of State in the state where the business is located. If the company is an LLC, partnership, or corporation, it will show in those records. If it shows up in this kind of search, then it is not a sole proprietorship. If it does not surface in the state's business entity records, that probably means that it is a sole proprietorship. However, it's always possible that there could be an error in the database, or that you may have entered a "doing business as" (dba) fictitious business name rather than the official name of the business.
What Starts Small May Grow Big
Companies that start as sole proprietorships don't have to stay that way forever. It's not unusual for self-employed individuals with an entrepreneurial spirit to initiate operations as a sole proprietor, but then later decide to form a legal entity. Even some huge enterprises started out as sole proprietorships. One famous example is the retail giant Sears. The company got its start in the late 1800s when R.W. Sears started a side business. Sears, who was working as an agent in a railway station, bought a box of watches and sold them to his colleagues to make extra money. He did so well that he decided to start his own business and formed the R.W. Sears Watch Company. When it was time to expand, Sears entered into a partnership with watchmaker A.C. Roebuck. That partnership came to be known as Sears, Roebuck, and Company, which eventually became a publicly traded corporation. The final iteration, Sears Holdings, declared bankruptcy in 2018 and dissolved soon after.