Do Sole Proprietorships Have Stockholders?

by Christian Fisher Google

Sole proprietorships are not designed to have stockholders. In the United States, you can own shares of stock only in a company that has been formed as a separate entity from its founders, such as a corporation or limited liability company. A sole proprietorship is not considered separate from its founder. Investing in a sole proprietorship is done in other ways.

Sole Proprietorships

Sole proprietorships are unincorporated, single-owner businesses. Many sole proprietors file their state and federal taxes from business income using just their Social Security numbers. A sole proprietor can operate her business under her own name or file for a doing-business-as, or fictitious name, license with the county from which she'll operate.

Owner's Equity

A sole proprietor's total business assets minus her total business liabilities equal her owner's equity in the business. The assets include, but are not limited to, start-up capital, available cash, property, products and equipment. The liabilities include operating expenses, taxes, insurance costs and all costs of doing business. Knowing an owner's equity lets you determine the financial health of the sole proprietorship.


Providing a loan with reasonable payment terms and an interest rate is one way to "invest" in a sole proprietorship. Many sole proprietors launch their businesses with low-interest cash loans from friends and relatives. You can offer hard money lending to a sole proprietorship and not necessarily be a part of the business. Your profit is made from the interest rate you and the proprietor agree on. If the business fails, you're still entitled to having your loan repaid to you.


Another way to have a stake in a sole proprietorship is to participate in peer-to-peer lending or contribute to a crowdfunding campaign at sites such as Kickstarter, MicroVenture and IndieGogo. Crowdfunding sites allow you to micro-invest in sole proprietorships with just a few dollars. Typically, the return on your investments is not financial, but proprietors seeking funding often provide gifts, special offers and other rewards for your contribution.


Partnering with a sole proprietor is another way to have a stake in her business. A partnership is an unincorporated, multiowner business. This approach will give you half of the business's responsibilities and liabilities, as well as half of the profits and rewards. As a partner, you have a legal right to make decisions on behalf of the business, giving you some control over how your financial investment in the business is used. The downside is that, if the business fails, your entire investment is at risk and could be lost.

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