What is a sole proprietorship?
A sole proprietorship happens when an individual owns an unincorporated business by himself or herself. He or she is the only business owner, and all debts of the business are debts of the owner. There are no formal requirements to form or conduct business, the owner has unlimited liability, but taxes are paid by the individual.
What are the advantages of forming a sole proprietorship?
You own it all
You have total control
You get all the profits
It is easy to form
It is easy to dissolve
Simple tax situation
No taxes on the business separately
You may deduct business expenses on your personal gross income
What are the disadvantages of forming a sole proprietorship?
You are personally responsible for all losses and debt
It is difficult to get financing
It is difficult to sell because the business is not separate from the individual
Few tax advantages
Dependent on the health and motivation of the owner
All business profit is taxed as personal income, even if you do not take the money out for personal use
You must pay additional self-employment taxes for Social Security Benefits