Starting a Business: Sole Proprietorship
There are four basic forms of business organizations available: limited liability companies (LLCs), partnerships, sole proprietorships, and corporations. This post deals with sole proprietorships.
The proper choice of the form of business operation will affect your business for a long time. Obtaining my assistance or the assistance of another attorney who is knowledgeable in this practice area is critical to your success.
Here is some information about sole proprietorships, as well as a couple of the considerations when selecting which form of business operation is best for you.
What is a Sole Proprietorship?
A sole proprietorship is a business with one owner (for tax purposes if a husband and wife are the only owners, they are treated as one owner). The owner and business are treated as one and the same, with a common tax identity. There is no separate legal entity for a sole proprietorship. A sole proprietorship is the simplest of forms of organization for a business.
What kinds of tax issues affect Sole Proprietorships?
Tax Issues. Although, unless the business has employees, a tax identification number is not required, I strongly recommend one be obtained in order to protect the identity of the owner during business operations. If the business has an employee, it is required to have a tax identification number and withhold taxes and pay the employer taxes just like every other business organizational form with employees.
The income and expenses of the sole proprietorship are reported on Schedule C of the owner’s person income tax return (Federal Form 1040).
Does a Sole Proprietorship offer liability protection?
Since the sole proprietorship is treated as one and the same as the owner, there is no liability protection for the owner.