The owning and operating of a business is a complex task that requires a certain level of business and legal knowledge. While there are many different types of businesses, the most popular business type is the sole proprietorship. For many EB-5 investor visa recipients, their sole proprietorship was the key that unlocked the funding and means through which they applied for and received the EB-5 investor visa.

The term ‘sole proprietor’ refers to the single owner of a business or company whose personal identity is not separate from the business, with the business instead being considered an extension of this person in terms of debts and/or liabilities. A sole proprietorship can be run under a false name; for example, a business registered as Tom’s Coffee Shop that is run by an owner named Suzy. While the business does not carry the legal name of the owner, it is not a separate entity and therefore is still deemed an extension of the sole proprietor, who owns 100% of the business.

The benefits of sole proprietorship for an entrepreneur are one of the many reasons why so many businesses now only have one owner and no partnerships or shared investors. Under a sole proprietorship, an owner need only register their name and obtain any legal licensing necessary for the running of their business before officially operating and providing their products and services. The ability to submit personal tax returns each year rather than filing separate business returns is often a large incentive for those interested in starting businesses as sole proprietors; business expenses such as travel, gas, and space rental are all tax-deductible. Sole owners also have the freedom to set their own hours of operation (while meeting the needs of the clients and customers), which can allow for more time spent with family or focused on development and growth of the business.

Although sole proprietorships are ideal for many, there are some drawbacks that must be mentioned.  Due to the fact that there is no legal separation between a sole proprietor and their business, any lawsuits, liabilities, claims, or debts incurred by the business are the legal, personal responsibility of the owner. If the business falls into debt, personal assets, such as homes, cars, and real estate, can be seized to cover these debts if necessary. A sole proprietor opens themselves up to personal liability in a way that other forms of business do not – partnerships and incorporated businesses do not allow for seizing of personal property to pay for debts or settle legal battles.

A sole proprietorship can be a great way to begin a small business or company, however, many persons switch to other forms of business once they experience a certain level of growth or success within their business. Simpler than other forms of businesses, sole proprietorships allow business owners to start and grow their business at their own pace, with no shared revenue or business assets, which permits business owners the ability to save and invest their profits and maximize their earnings.  If you are interested in applying for the EB-5 investor visa but are unsure of ways in which a business idea can become profitable and successful without the shared earnings of a partnership, a sole proprietorship may be for you.