ADVANTAGES of a Sole Proprietorship
- Relatively little time or expense
required for creation
- No state paperwork
- Most states do not impose a fee
for the privilege of existing
- No separate tax filing for the
business is required. Instead
profits or losses of the business
are reported on the owner's tax
return
DISADVANTAGES of a Sole
Proprietorship
- The owner is personally
responsible for the debts and
liabilities of the business
- Obtaining capital, through such
means as a bank loan, can be
more difficult as lending
institutions often require a more
formal entity structure
The vast majority of small business start out as Sole Proprietorships.
These firms are owned by one person, usually the individual who has
day-to-day responsibility for running the business. Sole proprietors
own all the assets of the business and the profits generated by it. They
also assume complete responsibility for any of its liabilities or debts. In
the eyes of the law and the public, you are one in the same with the
business. It is the easiest type of business to establish, as no state
filing or agreement with other owners is required.
Further, the name of the business is the owner's name unless he or
she applies for a DBA (doing business as) for the business. A DBA,
also called fictitious name or an assumed name, allows the business
to operate under a different name, such as Smith's Design instead of
John Smith. DBAs are typically obtained from the county government.
Federal Tax Forms for Sole Proprietorship
(only a partial list and some may not apply) Form 1040: Individual
Income Tax Return
Schedule C: Profit or Loss from Business (or Schedule C-EZ)
Schedule SE: Self-Employment Tax
Form 1040-ES: Estimated Tax for Individuals
Form 4562: Depreciation and Amortization
Form 8829: Expenses for Business Use of your Home
Employment Tax Forms
Santos Associates, FEDERALLY AUTHORIZED TAX
PRACTITIONERS, can help you with your accounting, tax
and financial planning needs. Call today for an appointment &
consultation. We are not attorneys, we can refer competent council
upon request.
Sole Proprietorships
