Sole proprietor liability

From a legal standpoint, as a sole proprietor, you are personally liable for any debts your business incurs. Some states may give your house homestead protection; state or federal law may protect your pensions and even Individual Retirement Accounts (IRAs).

But if in the operation of your business you or your company are sued for negligence, as a sole proprietor, your personal assets would be in jeapardy. The only protection for your personal assets is adequate insurance against accidents and other liabilities, and paying your debts in full - a good practice no matter how your company's structured.