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Most small businesses with less than ten employees are sole proprietorships. The major drawback of the sole proprietorship is that there is unlimited liability to the owner (Block-Hirt, 2004). In dissolution of the entity's debts, the owner loses not only the capital investment of the business, but possible may lose personal assets. The profits or losses of a sole proprietorship are taxable as though they belong to the individual owner (Block-Hirt, 2004). Therefore, if a sole proprietorship makes $25,000, the owner/proprietor will claim all profits on an individual tax return. Approximately 75 percent of the 21 million business firms in this country are operating as sole proprietorships, and these produce approximately six percent of the total revenue and 27 percent of the total profits of the U...
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