Sole Proprietorship for your small business
. . . means being your own boss–your only boss!
A sole proprietorship, also known as a ‘proprietorship’, is a business ran by one owner. A proprietorship allows no legal distinction between the owner and the business. All profits and all losses accrue to the owner (subject to taxation). All assets of the business belong to the owner. Likewise, all debts of the business belong to the owner who must pay them from his personal resources. This means that the owner has unlimited liability. It is a “sole” proprietorship in the sense that the owner has no partners (partnership). A sole proprietor may do business with a trade name other than his or her legal name. This also allows the proprietor to open a business account with banking institutions.
Advantages of a sole proprietorship:
- easy to start up with little paperwork
- fewer regulations than other business types
- owner makes business decisions
- easy to discontinue
- owner is not double taxed, as is a corporation
- owner can make quick decisions unhindered by others
- owner has total control of the business
- no tension with partners
- owner takes all the profits.
This is the main reason that most businesses are proprietorships. A sole proprietorship is not a corporation; it does not pay corporate taxes, but the owner pays self-employment taxes on the profits, making accounting much simpler.
Disadvantages of a sole proprietorship:
- hard time raising capital
- owner has unlimited liability
- all losses accrue to the owner
- owner retains all risk.
As a sole proprietorship becomes successful, the risks tend to grow. To minimize those risks, a sole proprietor has the option of forming a corporation, or a Limited Liability Company (LLC). -Information from Wikipedia.com
If you have a sole proprietorship, how did you decide on that form of ownership? Does this form of business present any difficulties for attaining success? If so what advantages out weight the disadvantage?
Books at Amazon
There are many good books on forming a sole proprietorship. We have linked to a few here for you at Amazon. We are Amazon Associates and funds derived from the sale of books directly go towards keeping this Start Your Business blog going and providing much needed information and resources to those seeking it.
Surprisingly Simple: Independent Contractor, Sole Proprietor, and LLC Taxes Explained in 100 Pages or Less by Mike Piper (Paperback – Jul 2009)
Working for Yourself: Law & Taxes for Independent Contractors, Freelancers & Consultants by Stephen Fishman Attorney (Paperback – Feb 10, 2008)
Ultimate Book of Forming Corps, LLCs, Partnerships & Sole Proprietorships by Michael Spadaccini (Paperback – Mar 15, 2004)
Self-employed Tax Solutions: Quick, Simple, Money-Saving, Audit-Proof Tax and Recordkeeping Basics for the Independent Professional by June Walker (Paperback – Jan 1, 2005)
Small Business For Dummies (For Dummies (Business & Personal Finance)) by Eric Tyson and Jim Schell (Paperback – Mar 4, 2008)
HOME BUSINESS TAX DEDUCTIONS: Keep What You Earn by Stephen Fishman Attorney (Paperback – Dec 8, 2008)
Deduct It! Lower Your Small Business Taxes by Stephen Fishman Attorney (Paperback – Dec 8, 2008)