A sole proprietorship is a business ownership structure that is intimately linked with the assets and financial situation of its owner-operator. The financial statements of a sole proprietorship are similarly tied to its owner's personal finances in ways that are not the case for other business ownership structures, such as corporations and LLCs. For this reason, some of the company's financial statements -- including its balance sheet and cash flow statement -- may not be relevant to a potential business buyer. However, a lender might be interested in the relationship between a sole proprietor's business and personal assets.

Design your sole proprietorship's cash flow projection to reflect the symbiosis between your business and personal resources. The upper part of the statement should list all available sources of cash, including personal assets such as infusions from your own bank account and loans from family and friends. The lower part of the cash flow statement reflects all the funds that will flow out of your business during the designated period. These include business operating expenses, such as materials, rent and payroll, and personal draws for your own living expenses that also deplete your company's operating funds.

Prepare your sole proprietorship's income statement to reflect that the profit or loss from your business is the same as your personal business income for the purposes of tax reporting and evaluation for creditworthiness by a financial institution.

For the purposes of a sole proprietorship's profit and loss statement, the amount the business owner actually withdraws from the business is irrelevant. The profit and loss statement simply reflects the amount that is left over after subtracting deductible operating expenses from gross revenue. This accounting convention differs from the way a business entity such as a corporation prepares its profit and loss statement: For a corporation, profit or loss is the amount that the business has left over after all of its officers, including owner-operators, have been paid.

Compile your sole proprietorship's balance sheet to express your personal investment in your company's equity, or its overall value. Use the assets side to list your company's tangible and intangible assets, as well as its cash on hand. Use the liabilities side to list everything the business owes, including accounts payable and personal loans taken out to finance business activities. A lender or potential business buyer may also ask to see a personal balance sheet reflecting personal assets you may be able to infuse into the business if you experience a cash flow shortfall.