Final answer:
Operating as a sole proprietorship exposes Jane Doe, a barber, to unlimited personal liability for business debts and legal issues, which can put her personal assets at risk. Forming a corporation, despite its complexity, offers protective benefits including limited liability and easier capital raising. Incorporation can provide stability and security for her business.
Step-by-step explanation:
Jane Doe, as a barber, may be considering operating as a sole proprietorship due to the perceived complexity of forming a corporation. However, from a risk perspective, operating as a sole proprietorship can expose Jane to significant personal financial risks. Unlike a corporation, a sole proprietorship does not provide any separation between business liabilities and personal assets. This means that if the business incurs debts or is sued, Jane's personal assets, such as her home and savings, could be at risk to satisfy business liabilities.
Moreover, raising capital for a sole proprietorship can be challenging, as lenders may be more hesitant to provide funding without the legal protection that a corporation structure offers. Plus, if Jane ever decides to close the business or it fails, she would be solely responsible for any debts or legal responsibilities that arise from the business operations.
Therefore, while the formation of a corporation may seem tedious, it offers significant protections that can limit Jane's personal risk. The incorporation process can mitigate the dangers of unlimited liability and make raising capital easier, potentially leading to a more stable and secure business in the long term.