Running your business as a sole proprietorship is a relatively easy way to get your business started. In fact, since a sole proprietorship is so simple it is one of the most common businesses around today. Most of the time all it takes to start a sole proprietorship business are merchant accounts and services or products to sell. It does not require the filing of any specific types of papers to get the business started. In addition, you do not have to pay corporate income taxes. You can even take advantage of credit card processing services in order to make it easier to run the business alone.
The Definition of a Sole Proprietorship
The difference between a sole proprietorship and the average business is the fact that only one person operates the business. When you own a sole proprietorship, you are the only one that makes the decisions. In addition, you take all the risks and reap all of the rewards. Although you are the only one running the business, you do have the power to hire multiple employees. Only you can have equity stake in your company. There are no formal procedures that you have to go through in order to get your business started. In fact, if you have merchant accounts that provide a way for customers to make payments, you can get started right away. It is relatively inexpensive to get started and to provide credit card processing methods. Since you are the only one involved with making the decisions, you can focus more on the business and less on anyone with stake in that business.
Sole Proprietorships and Taxes
One of the main advantages of having a sole proprietorship is the fact that you do not have to file separate tax returns for the business. All you have to do is report all of the income for your business on Schedule C. This is an attachment to the 1040. In addition, there is no difference between you and your business as far as taxes are concerned. This means that the earnings that you make individually and from your business will not be taxed multiple times. If you did not have a sole proprietorship, your company’s income will be taxed as corporate income and your salary will be taxed as personal income. You can also take advantage of any losses your business had to balance out your other income.