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There usually are few formal requirements in establishing a soleproprietorship. However, some sole proprietorships, such as restaurantsand motels, are required to have licenses to legally operate as businesses.Other sole proprietors, such as barbers or plumbers, must have occupationallicenses as well as certain types of liability insurance. Somestates require a formal filing when a sole proprietorship begins or if thesole proprietorship chooses to use a fictitious name. Zoning ordinances,which prohibit businesses in certain parts of the community, can alsoaffect sole proprietorships.Example 1. Jennifer Edwards operated an accounting firm namedAccountants International, Inc. Jennifer had some trouble collectingon the account of a local corporate client that owed herseveral thousand dollars. When Jennifer decided to sue, she discoveredthat under state law, she could not sue in court becauseshe had not filed her business name with the city clerk’s office.She also found out that zoning ordinances prohibited businessesin homes in her neighborhood.Advantages of a Sole ProprietorshipSole proprietorships offer specific advantages. These advantagesinclude ease of creation, total control, retention of profits, freedom fromexcessive governmental control, and one-time taxation of profits.Ease of Creation A sole proprietorship is the easiest form of businessassociation to form. To create a sole proprietorship, a person needsonly to begin the operation of the business.Although some government regulations need to be addressed, mostapplicable regulations have nothing to do with the actual operation ofthe business. For instance, it may be necessary to check local zoningregulations or to research governmental licensing requirements. Furthermore,when a sole proprietor decides to hire workers, he or she willhave to contact the Internal Revenue Service to obtain an employeridentification number , which is assigned for income tax purposes.Becoming aSole ProprietorElsie Begay has beenworking for a localday care center,The ABCDaycare Center, forseveral years. Lastmonth she attended ameeting in which newideas for improvingservice were discussed.Some ideas wereinnovative and wouldhelp The ABC LearningCenter stand out fromits competition. Elsiehad been thinkingabout starting her ownday care center, so shedecided to open a centerthat implemented theideas discussed at themeeting. Is Elsie’sdecision an ethical one?Why or why not?Total Control Sole proprietorships offer business owners completecontrol over the operation of the business. All decisions are up to the soleproprietor. However, a sole proprietor is always free to seek the adviceof experts such as accountants, attorneys, and financial planners.Retention of Profits Another advantage of a sole proprietorship isthat the proprietor gets to keep all of the profits that the firm makes.Proprietors must still pay taxes on the profits that they make, however.Chapter 27: Sole Proprietorship and Partnership 585