What is a sole proprietorship and should I use it or another type of business setup?
A sole proprietorship is basically a business owned by one person. The kid in the neighborhood who mows lawns in the summer is probably a sole proprietor. The computer technician who hangs out his shingle and starts helping businesses with their computer networks is also probably a sole proprietor. Every tax year the individual who owns the sole proprietorship pays taxes on the profits from his or her own business as an individual. It is one of the simplest forms of ownership but it offers no liability protection. All of the non-exempt business assets of the sole owner are subject to the debts of the business, including loans, judgments from lawsuits and other liabilities. The sole proprietor’s own non-exempt non-business assets are subject to those debts as well. The use of a corporation, partnership or limited liability company is often a much smarter way to run a business so the owners’ personal assets are protected from business debts.
Related Questions
- If my company is a sole proprietorship and I registered with Revenue using my Social Security Number, will that number be sufficient to register as a Business Entity?
- I operate my business as a sole proprietorship. Can I deduct the claims I make for my family and myself through the MediDirect® program?
- What is a sole proprietorship and should I use it or another type of business setup?
