In a sole proprietorship, there is only one owner of the business. This business structure is the easiest structure to create, which can be highlighted by the fact that The Tax Foundation found there are 23 million sole proprietorships in the United States alone. This statistic is compared to the 1.7 million C corporations and 7.4 million partnerships and S corporations in the country. As the sole proprietor, you have lower startup costs and more freedom when it comes to making decisions for your business. However, you are completely liable for any debts or liability issues, which makes your personal assets vulnerable.
- Ownership- As the name says, there is only one sole owner in a sole proprietorship. As the sole owner, there is no distinction between the business and the individual. This means if your business faces bankruptcy or liabilities, your personal assets can be used as collateral and be taken away from you to settle tax and other debts.
- Formation- If you want to be a sole proprietor, all you must do to create a business is to obtain the right licenses, permits, and registrations required by your state. Like all businesses, however, it’s important you have a thorough business plan, enough funds, and small business grants to make a profit and be successful.
- Taxes- When Uncle Sam comes knocking at your door, you have to report your income, losses, and expenses on IRS Schedule C Form 1040.
- Examples- Restaurant owners, repairmen, childcare workers are often structured as sole proprietorship businesses.