Starting and running a business is ripe with risks, both to the individual and the business. However, when an individual elects to run their business as a sole proprietorship, they are personally taking on the business's legal risks. The most frequently raised concern of sole proprietors involves their personal liability for business debts.
For example, if a customer is injured, a sole proprietor could be personally sued, and his personal assets seized in a judgment, whereas if the business were structured as a separate entity, the business owner could potentially avoid personal liability. For a sole proprietor, liability is a complex topic and, surprisingly, it can actually cut both ways.