{"id":1952,"date":"2017-06-19T01:47:00","date_gmt":"2017-06-19T06:47:00","guid":{"rendered":"http:\/\/agrilife.org\/texasaglaw\/?p=1952"},"modified":"2026-04-17T15:25:27","modified_gmt":"2026-04-17T20:25:27","slug":"business-entity-selection-series-sole-proprietorship","status":"publish","type":"post","link":"https:\/\/agrilife.org\/texasaglaw\/2017\/06\/19\/business-entity-selection-series-sole-proprietorship\/","title":{"rendered":"Business Entity Selection Series: 2 – Sole Proprietorship"},"content":{"rendered":"

We will kick off this series with the simplest, most widely used business structure, the sole proprietorship.<\/p>\n

What Is a Sole Proprietorship?<\/strong>\u00a0 A sole proprietorship is simply a single individual engaged in business activity.\u00a0\u00a0The\u00a0 2012 U.S. Census of Agriculture<\/a>\u00a0reports that nationwide,\u00a0just over 86% of farms are sole proprietorships.\u00a0\u00a0In Texas, that number is even higher at\u00a090%.<\/p>\n

\"peter\"<\/a><\/p>\n

Governing Law:\u00a0 <\/strong>Unlike the other entities we will discuss in this series, the sole proprietorship is not governed by statute.\u00a0 There is no provision in the Business Organizations Code to govern sole proprietorships.<\/p>\n

Formation:<\/strong>\u00a0 Unquestionably, a sole proprietorship is the most simple business structure to set up as there are no filings or fees required.\u00a0 A person may simply start up his or her business.\u00a0 If the business will be conducting business in a name other than that of the owner, legally termed “doing business as,” a DBA certificate must be filed either with the county clerk in the county where the premise is maintained or, if no business premise is maintained, in all counties where business is conducted.<\/p>\n

Management\/Decision-Making:<\/strong>\u00a0 This business structure gives the manager the greatest level of managerial flexibility and control, as he or she is free to manage the business as desired.\u00a0 There are no limitations or requirements on how management is to be conducted or how decisions are to be made.<\/p>\n

Liability:<\/strong>\u00a0 The major downfall of sole proprietorships is the fact that there is no limit on liability for the owner.\u00a0 Thus, the sole proprietor, as well as his or her personal assets, are at risk for liability in the event that a claim is made.\u00a0 For example, if a farm is operated as a sole proprietorship and the farmer is involved in an automobile accident,\u00a0all of the farmer’s assets–personal and business–are in jeopardy if a suit is filed and judgment entered.<\/p>\n

Tax Treatment:<\/strong>\u00a0 Another potential concern related to the sole proprietorship is the fact that all business earnings are treated as personal income for income tax purposes.\u00a0 Additionally, the business owner’s income is subject to self-employment taxes.<\/p>\n

Termination of Business:<\/strong>\u00a0 Because the sole proprietorship is owned only by one person, the death of the owner constitutes the end of the business.\u00a0 This makes it much more difficult for a sole proprietorship to transfer between generations.\u00a0 Statistics show that only about 30% of family businesses survive to the second generation, only 12% to the third generation, and only about 3% continue in operation beyond the fourth generation. \u00a0All farms, and especially those operating as a sole proprietorship should have a detailed transition plan in place.<\/p>\n

Summary:<\/strong>\u00a0 The sole proprietorship is the most common business entity.\u00a0 The main benefits are the ease of creation and flexibility in management.\u00a0 Major downsides of the sole proprietorship is the unlimited personal liability and difficulty in the generational transfer.<\/p>\n","protected":false},"excerpt":{"rendered":"

We will kick off this series with the simplest, most widely used business structure, the sole proprietorship. What Is a Sole Proprietorship?\u00a0 A sole proprietorship is simply a single individual engaged in business activity.\u00a0\u00a0The\u00a0 2012 U.S. Census of Agriculture\u00a0reports that nationwide,\u00a0just over 86% of farms are sole proprietorships.\u00a0\u00a0In Texas, that number is even higher at\u00a090%. Governing Law:\u00a0 Unlike the other entities we will discuss in this series, the sole proprietorship is not governed by statute.\u00a0 There is no provision in the Business Organizations Code to govern sole proprietorships…. Read More →<\/a><\/span><\/p>\n","protected":false},"author":2444,"featured_media":1624,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[36],"tags":[],"class_list":["post-1952","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-entity-selection"],"acf":[],"yoast_head":"\nBusiness Entity Selection Series: 2 - Sole Proprietorship - Texas Agriculture Law<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/agrilife.org\/texasaglaw\/2017\/06\/19\/business-entity-selection-series-sole-proprietorship\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Business Entity Selection Series: 2 - Sole Proprietorship - Texas Agriculture Law\" \/>\n<meta property=\"og:description\" content=\"We will kick off this series with the simplest, most widely used business structure, the sole proprietorship. 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