What is a Sole Proprietorship?
A sole proprietorship is the automatic status you achieve when you start a business by yourself, but haven't filed for a formal business entity.
Advantages:
Although there aren't a lot of benefits to a sole proprietorship, it doesn't take any effort to create one.
Drawbacks:
In a sole proprietorship, the owner is liable for any debts or outstanding responsibilities of the business.
Additional Considerations:
In a sole proprietorship, a sole proprietor must report all business profits on their personal income statements. If the business is sued, the business owner is at a risk to lose his or her personal assets. In addition, a sole proprietor must pay all necessary taxes on their "employment" in the business (including self employment, social security, and medicare). If a business remains a sole proprietorship, it can make raising capital difficult because it can convey a weak or unstable infrastructure. If you want to conduct business on a name other than your own in a sole proprietorship, you must file for a DBA (doing business as) permit. You'll also need to secure business licenses and permits for your county, city, state, etc.
To secure your business's future, and to protect your personal assets and income, you may decide to incorporate with a more advantageous entity. Entities to consider include an LLC, S Corp, Limited Partnership, Limited Liability Partnership, and a C Corp.
To get help considering your options, and to determine the correct entity for your business, simply fill out the form below and one of our representatives will give you a free consultation: