The Proprietorship

The Proprietorship

A business owned by a single individual is called a sole proprietorship. The owner of a proprietorship is personally liable on all business obligations since there is no legal separation between the owner and the business. If such a business becomes successful, the accompanying risks tend to grow as the business grows. The owner will therefore usually wish to minimize his personal exposure by transferring the business to a wholly owned corporation or limited liability company. This may be done very simply by creating the new entity and transferring the business to it. The former owner's role then changes ： He becomes a director，shareholder，and officer of the corporation or the manager of the LLC. In that way, it is unlikely that the proprietor’s per­sonal assets will be available to creditors whose claims arise after the transfer takes place. The former owner，however，remains personally liable on claims arising or liabilities created before the transfer to the new entity took place.