Describe the advantages and disadvantages of operating a business as a sole proprietorship.

The advantages of sole proprietorships include freedom, ease of formation, and tax benefits. A sole proprietor is free to operate his or her business as he or she desires. There are few legal requirements for start-up and low start-up costs. Losses from a sole proprietorship can offset income from personal sources, providing tax benefits. The disadvantages of sole proprietorships include unlimited liability, lack of continuity, and limited financing options. A sole proprietor is totally responsible for all of the debts of the business and may have to give up personal assets to repay those debts. A sole proprietorship lacks continuity because the business dissolves with the death of the owner. Finally, sole proprietors have a limited ability to secure financing, relying mostly on their personal resources.