A sole proprietorship is an unincorporated business owned and run by one person – with zero distinction between the owner and the business. The sole proprietor enjoys all the profits and is personally responsible for all business liabilities, losses, and debts. A sole proprietorship is one of the latest expensive business structures to start.
Think about it: just one person owning a business all by himself, the legal requirements are as essential as they can get, and all the profit the company offers. Similarly, if things go south, just one person gets to handle all the mess. However, a sole proprietorship is a well-intentioned model for small business owners who don’t intend initially to derive large profits. In short, it is excellent if you are thinking about operating a small business.
Sole Proprietorships and Small Businesses
Most people consider a sole proprietorship and its owner identical. When it comes to small business health insurance, a sole proprietorship can be defined as a small business. Still, if you have no workforce but yourself, your sole proprietorship will most likely not qualify for a group plan.
Sole proprietors can hire people, just like any other small business owner. According to the IRS, any time a sole proprietor employs someone other than an independent contractor.
Although a sole proprietorship is the simplest form of business structure, you may be unsure how it affects health insurance options. A sole proprietorship might qualify for group health insurance if it has a few employees.
Let us look at the defining characteristics of a sole proprietorship.
- No corporate entity exists
- Ownership by one self-employed individual
- The owner remains responsible for liabilities and business assets
- The owner is an extension of its business
Good Business Practices
As the owner of a sole proprietorship, you get to make all the decisions and call all the shots. You have no partners to consult with or some board of directors to discuss with either. You will also have personal liability protection. Just like that, there are multiple benefits of a sole proprietorship; let us discuss:
Complete Ownership
Believe it or not, but at some point, sharing business ownership can be very difficult, even if you think that you get along with your co-owner well. When you are the only one managing and making all the decisions, you are not responsible for other people’s mistakes. It’s like a one-person show – you have the spotlight and get to do whatever you feel like.
You get to choose how many days your business will operate and which times to come in; plus, you are held responsible for your work by yourself and the clients. With complete ownership comes a full hold of profits. You get to enjoy all the profit you make, and you decide to use it.
A Simple Kick-Start Process
Usually, a business owner’s job when forming a sole proprietorship is registering with the local office and obtaining necessary licenses. A sole proprietorship does not need legal counsel to build a business, which helps reduce costs. As a sole proprietorship, you can file a business name but don’t have to do it. Business owners who operate sole proprietorships can visit their local businesses and start working, which is more straightforward than any other business structure.
To start a sole proprietorship business in the United States is a massive advantage to the business owner because of the ease of starting one.
Simplistic Income Taxes
You are already connected with your business when you are the only person dealing with all business matters, so you don’t have to file business taxes separate from your income taxes. The business income is your income, so a personal tax return and a tax form (Schedule C) allow one to report income and losses to the IRS using the SSN. In addition to all your business-related expenses, they are tax-deductible, including the cost of travel, goods, fees, and more. The tax rates are lower for sole proprietors than for corporations and partnerships.
All in All
Sole proprietorship allows people to open their businesses with complete ownership and responsibility for their successes and failures. However, it’s essential to remember that starting and then operating a business can be equally stressful and challenging as it is rewarding.
Even if you believe that sole proprietorship is the best option for you, surround yourself with positive energy and great support from other business owners; local business centers can also help you thrive in operating and growing the business.
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