35.1 Legal forms of business

In most countries consultants can choose among several legal forms of business organization. This choice is not always completely free. Local legislation may include special regulations for organizing and operating professional services, or for firms with foreign ownership. Therefore an international consulting firm may have to use different legal forms in different countries. Unless the consultant is sufficiently knowledgeable in legal matters, he or she should seek a lawyer’s advice. An accountant’s or tax adviser’s viewpoint is equally important because the forms of business organization differ as regards registration, taxation, record-keeping, reporting and liability.

Sole proprietorship

A sole proprietorship is a business owned and operated by a single person. The owner may be a single practitioner, or may have a number of associates. While normally and legally there is no limit to the number of staff, it is usual for a “sole owner” to employ only a few associates, and perhaps only for the duration of specific assignments. The firm’s net income is taxed as the owner’s personal income; the owner’s liability for debts incurred by the firm is unlimited.