Signifiance

• A Sole Proprietorship provides a business with the ability to buy and sell securities under the business. The capital loss or gain is associated with the business, not the person who trades under the account. The tax rate for investments by small businesses are typically lower than the tax rate of an individual.
  
  

Function

• Small businesses trade stocks as a means of supplementary income. Most small businesses use trading stocks as a form of raising capital for future expenditures. In addition, if the small business is successful in trading, the profits may be able to be given to employees as bonuses, pensions or gifts.
  
  

Features

• In order to trade under a a Sole Proprietorship account, the business owner must sign a Sole Proprietorship new accounts form in order to acknowledge the risks of investing in the stock market. This is intended so the brokerage firm in which the trading account is registered under is not liable for any losses.
  
  

Speculation

• Small businesses are not required to hold securities for long periods of time. However, the tax rate for long-term capital gains is significantly lower than the tax rate for short-term capital gains. In addition, many small businesses are unable to day-trade or watch the market throughout the day. Thus, many financial advisers recommend that small businesses hold onto stocks for a year or longer, so they are able to qualify for the lower tax rate.
  
  

Warning

• Investing in the stock market is very dangerous. The market is a zero-sum game: in order for an individual to have a capital gain, another individual must have a capital loss. Many traders have college degrees and decades of experience. This makes it difficult to profit in the market. Take a considerable amount of time researching a company before investing.