In the United States, there are several types of structures available to a single-owner business researching how to start a business, including sole proprietorship, C corporation, S corporation, and limited liability company (LLC). Show
The type of business entity you choose can impact everything from how you pay your taxes to the amount of paperwork you have to fill out to whether you can bring on investors or not. One of the most common business structures is a sole proprietorship, which many individuals running small businesses use, including freelance graphic designers and computer programmers. What is a sole proprietorship?A sole proprietorship is an unincorporated business owned by one person. At its core, there is no real distinction between the owner of a sole proprietorship and the business itself. Because of that, a sole proprietor has unlimited personal liability. That means your personal assets—your house, personal bank accounts—are also at risk if a claim is made against the business (e.g., through a lawsuit) or you have to pay back business debts. On the flip side, filing taxes is relatively painless because of the simplicity of the business structure. As a sole proprietor, you file your business income on your personal income tax return. 4 advantages of a sole proprietorship
A sole proprietorship is the simplest of all the structures for a single-owner business. Your business is automatically considered a sole proprietorship without having to incorporate your business. However, you must apply for any licenses or permits that your state requires for your profession. As the owner, you are responsible for all business debts, losses, and liabilities, but are also entitled to all the business profits, too. Other advantages include:
5 disadvantages of a sole proprietorship
Here are some of the drawbacks to the sole proprietor business structure:
Starting out as a sole proprietor is a good way to test the waters as an entrepreneur since there is very little investment in both time and money to this type of business entity. Join 446,005 entrepreneurs who already have a head start.Get free online marketing tips and resources delivered directly to your inbox. No charge. Unsubscribe anytime. What are the advantages of a corporation over a sole proprietorship?There are several advantages to becoming a corporation, including the limited personal liability, easy transfer of ownership, business continuity, better access to capital and (depending on the corporation structure) occasional tax benefits.
Which of the following is an advantage of ownership of a corporation compared to that of a sole proprietorship?Shield from Personal Liability
The corporation, not its shareholders, answers for the corporation's debts. Therefore, the corporate form protects the property of its owners from being seized to pay business obligations. Shareholders' responsibility and losses are limited to their investment in the business.
Which of the following is an advantage of corporations over sole proprietorships or general partnerships?Limited-Liability Companies
This form provides business owners with limited liability (a key advantage of corporations) and no “double taxation” (a key advantage of sole proprietorships and partnerships).
Which is an advantage of the corporate form of business ownership?The corporate form of organization offers several advantages, including limited liability for shareholders, greater access to financial resources, specialized management, and continuity.
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