Ownership

Kollin Kennedy

Sole Proprietorship

Definition: The simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. Owned by one person. Allows people to report business income and expenses on their individual tax returns. Summed up in a phrase "You Are in Business"

Advantages:

  • Sole or transfer can take place at the discretion
  • No corporate tax payments
  • Minimal legal cost to forming a sole proprietorship
  • Attractive to small investors because they are relatively an easy start up
  • The one person makes all of the decisions in the business
  • Can hire employees
Disadvantages:
  • Investors want usually invest in a sole proprietorships
  • All responsibilities and business decisions fall on the shoulders of the sole proprietor
  • Your business doesn't exist as a separate legal entity
  • The owner remains personally liable to any losses or debts
  • Must pay self-employment taxes

Regulations to Follow

  • Business name for Sole Proprietorship - Must be a legal and appropriate name
  • No Formation Requirements - you are not required to file any documents with a state agency
  • Registering to do Business- Research to see if there are any rule that may apply in area
  • Income And Self Employment Taxes

Some More Facts:

  • The IRS says a domestic LLC in which the sole proprietor is the only member is not a sole proprietorship if he/he treats the LLC as an incorporated business.
  • Can use IRS publications 334, Tax guide for small businesses, to determine tax filling a payment schedule

Examples:

A Tutor Or Computer Service Repair Company