Should i form a sole proprietorship

Small Business Events. You are here SBA. Sign Up For Our Newsletter. Forming a Sole Proprietorship No formal action is required to form a sole proprietorship. Sole Proprietor Taxes Because you and your business are one and the same, the business itself is not taxed separately — the sole proprietorship income is your income.

Advantages of a Sole Proprietorship Easy and inexpensive to form : A sole proprietorship is the simplest and least expensive business structure to establish. Complete control. Because you are the sole owner of the business, you have complete control over all decisions.

Simplified tax preparation. Disadvantages of a Sole Proprietorship Unlimited personal liability. Also, the sole proprietor declares any income--or losses--from the business on his personal taxes at personal tax rates. In general, setting up a sole proprietorship takes almost no time and requires a bare minimum amount of legal work.

Many times you only need to call city hall and ask what forms you need to fill out and how to comply with any permits, according to Lydia Dishman of Entrepreneur.

Very few state and federal laws regulate the structure of a sole proprietorship, according to the Iowa secretary of state. For businesses that do not expect to grow much, such as a home business, and have little change debt liabilities, the sole proprietorship costs much less than forming an LLC or corporation. Because there is one owner, the sole proprietor gets to make all of the business decisions.

Fringe benefits, such as health insurance, are not entirely deductible. Should the sole proprietor incur any debts, he retains complete liability for them, which could put personal assets in danger. In general, sole proprietors have a harder time attracting investment capital or getting a business loan than a corporation or LLC.

Business Formation. Choosing a Business Structure. Sole Proprietorships. Forming a Corporation. See All Business Formation Articles. Talk to a Lawyer Need help? Start here. Practice Area Please select Zip Code.