A proprietorship happens when a person simply starts doing business in his or her own name or under a trade name. For example, suppose a fellow named Vince wanted to sell his collection of vinyl records. He could rent a table at a flea market or even rent a store and start selling his records. Because Vince does everything in his own name he is called a proprietor and his business is called a proprietorship.
Vince could call his business anything he wants as long as he doesn’t use a name someone else has reserved. To find out if a name is already reserved and to register a trade name Vince would go to a registry office. Since a proprietorship is unincorporated the registered name will not have Ltd or Inc at the end of the name.
As a proprietor, Vince
- Owns his vinyl records personally
- Profits of his business belong to him personally
- Has to report the business profits on his personal tax return
So, that’s a proprietorship – someone who is doing business in their own name or under a trade name.
We will be posting a blog on the advantages and disadvantages of proprietorships, corporations and partnerships but if you would like to find out which way of doing business is best for you please give us a call. We would be glad to sit down with you to discuss your plans and determine which method of organizing your business would be best for you.