Selecting the use of the Sole Proprietorship for a new business requires an analysis of the pros and cons of the entity relative to your specific circumstances and needs, there, we have assembled a brief Q&A regarding the essentials related to the Choice of a Sole Proprietorship.
- What is a sole Proprietorship?
- How does a Sole Proprietorship compare to a Corporation?
- How does a Sole Proprietorship compare to an LLC?
- What forms are required to form a Sole Proprietorship?
- How is a Sole Proprietorship taxed?
- Who is liable for the debts of a Sole Proprietorship?
What Is a Sole Proprietorship?
The Sole Proprietorship is the simplest form of business. No formal filing with the state is required to form this entity. Only a business and/or occupational license is required to begin.
How Does a Sole Proprietorship Compare to a Corporation?
Unlike a shareholder of a Corporation, The Owner of a Sole Proprietorship liable for all of the debts of the entity. It does not have a continuous life. It dies upon the death of the owner.
How Does a Sole Proprietorship Compare to an LLC?
Unlike a Member in an LLC, The Owner of a Sole Proprietorship liable for all of the debts of the entity. It does not have a continuous life. It dies upon the death of the owner.
What Forms Are Required to Form a Sole Proprietorship?
No forms are required to be filed, but a business license/ occupational license is required from the local government.
How Is a Sole Proprietorship Taxed?
The profits and losses of the sole proprietorship “pass through” to the individual and the owner pays income tax on the profits of the business at the end of the year on their personal tax return.
Who Is Liable for the Debts of a Sole Proprietorship?
The business owner is the individual and they are personally liable for the business debts. These include all liabilities and taxes. There is no separation of the individual’s personal assets from those of the business and all are at risk of loss.