From Jean Murray,
Your Guide to US Business Law / Taxes.
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Starting a Sole Proprietorship

Most small businesses are sole proprietorships, because this type of business is the easiest and least expensive way to start into business. Here is the information you need to start a sole proprietorship:

Sole Proprietorship
A sole proprietorship (or “proprietorship”) is a form of business in which an individual starts a business under his or her own name. In a sole proprietorship, you are the business; that is, the business is not a separate entity from you.

Advantages of a Sole Proprietorship Here are some advantages of forming a sole proprietorship:

• Control
  You have complete control over all aspects of the business. You don’t have to ask permission of anyone to hire or fire employees, to take on a new product, or move to a new location.
  
  
• Profits
  You keep all the profits of the business; you don’t have to share them with anyone.
  
  
• Draw
  You can take money out of your company for your personal use (as a “draw”) at any time, as long as you make sure the business bills are paid.
  
  
• Ease of Setup
  You can start your business without any complicated or expensive legal filings, and you don’t need an attorney.
  
  
• Simple Taxes
  The profits of your company are taxed on your personal tax return, so you can simplify the filing process, if you have good tax software.

Disadvantages of a Sole Proprietorship
While many businesses set up as sole proprietorships, there are some disadvantages to this form of business ownership:

• Responsibility for Debts
  If the business has a loss or it owes money to creditors, you are personally responsible for payment.
  
  
• Responsibility for Liabilities
  If someone sues the business, you are personally liable. Your personal assets may be used to pay off debts or liabilities of the business.
  
  
• Difficulty in Obtaining Funds
  Because you are the only owner, you can’t sell any shares to fund business growth, and banks are more skeptical about lending money to sole proprietorships.
  
  
• No Continuation
  If something happens to you, the business ends, and your family may be left with a business that is difficult to sell or run without you.

If it sounds simple, it's because it is. The sole proprietorship is the oldest and simplest form of business ownership. If you decide to set up your new business as a sole proprietorship, follow the Startup Steps and you will be ready to go.