Definition: One broker owns all assets of the brokerage and operates the entire business, reporting all losses and profits as his personal income.
- Broker generally does business in his own name (i.e., John Jones, broker) or may obtain permission from the superintendent to do business in a business or trade name. Such a fictitious name should also be registered with the Ohio Secretary of State.
- The broker does not need to create any new legal entity as is required with a corporation, partnership, or LLC. No transfer of assets is necessary; instead, the broker uses his own assets to establish his business.
Advantages of choosing sole proprietorship
- Because there is no new legal entity that must be created or assets that must be transferred, it is the easiest and least complicated way of doing business.
- As the sole owner, the sole proprietor enjoys all profits, and can unilaterally make all decisions regarding how the business will be run.
Disadvantages of sole proprietorship
- There are no other owners or partners of the business with whom to share responsibility or to assist with decision making.
- The business terminates upon the death of the sole proprietor.
- The broker must bear all of the financial risk of the business.
- The broker is personally liable for the debts of the business.