When starting a business, you have several different structures to choose from, and each has distinct advantages and disadvantages.. A sole proprietorship is one of the structures you might consider when going into business on your own. How might this business structure support your needs as your business grows?
A sole proprietorship is often simple to start.
Starting a business can be complex, but choosing a sole proprietorship structure can streamline that process. While you will still have to obtain the necessary licenses and permits required by the federal, state and local government, you may not have to register a sole proprietorship with the state. You also do not need to apply for an employer identification number, unless you have employees. This means you can limit the paperwork you file before beginning operations.
A sole proprietorship can simplify your business finances and operations.
Because sole proprietorships are directly linked to the owner, the owner has complete control over the business and its finances. This means that you could utilize your own bank account for the company and take owner’s draws directly from the profits, though it may still be preferable to have a separate bank account for the business.
A sole proprietorship structure can also simplify the filing process during tax season. Rather than filing as a business and as an individual, owners of sole proprietorships report their profits or losses on their personal tax returns, though tax implications should always be discussed with a tax professional.
While structuring your business as a sole proprietorship has a number of benefits, it also has significant limitations and liability concerns. It is essential to consider all your options when forming a business and to discuss your options with a legal and tax professional. Additionally, some business types do not permit sole proprietorship as a structure, so the right guidance is necessary when selecting your business structure.