Reviewed by Jan 29, 2021| Updated on
A sole proprietorship, such as Radhe Shyam Groceries, can operate under the name of its owner or it can carry out business under a fictitious name. The fake name is just a trade name—it doesn't create a separate legal entity from the sole proprietor owner. Although simple to set up, the sole proprietorship is not a legal entity.
Owing to the simplicity of a sole proprietorship, ease of setup, and minimal cost, a sole proprietorship is a popular business type. A sole owner needs to register his name and obtain local licenses to get the sole owner ready for business.
Nonetheless, one distinct drawback is that the owner of a sole proprietorship remains personally liable for all the debts of the company. And if a sole proprietor company faces financial trouble, creditors can bring claims against the owner of the business. If such suits hold good, the plaintiff will have to pay his/her own money for the company debts.
The owner of a sole proprietorship generally signs contracts in his or her name, as there is no separate identity under the law for the sole proprietorship. Usually, the sole proprietor owner will have clients write checks in the name of the owner, even if the business adopts a fictitious name.