What is a Sole Proprietor?
According to our friends at the the Small Business Administration (SBA):
A sole proprietorship is the simplest and most common structure chosen to start a business. It is an unincorporated business owned and run by one individual with no distinction between the business and you, the owner. You are entitled to all profits and are responsible for all your business’s debts, losses and liabilities.
How do you form a Sole Proprietorship?
You do not have to take any formal action to form a sole proprietorship. As long as you are the only owner, this status automatically comes from your business activities. In fact, you may already own one without knowing it. If you are a freelance writer, for example, you are a sole proprietor.
But like all businesses, you need to obtain the necessary licenses and permits. Regulations vary by industry, state and locality. Use the Licensing & Permits tool to find a listing of federal, state and local permits, licenses and registrations you’ll need to run a business.
If you choose to operate under a name different than your own, you will most likely have to file a fictitious name (also known as an assumed name, trade name, or DBA name, short for “doing business as”). You must choose an original name; it cannot already be claimed by another business.
What is the purpose of TSAT’s Sole Proprietor Personal CFO vault?
Personal CFO is about learning how to become financially successful when you as a sole proprietor are experiencing struggles, but don’t know how to get from where you are to where you want to be.
What are some advantages of Sole Proprietorship?
- Easy and inexpensive to form: A sole proprietorship is the simplest and least expensive business structure to establish. Costs are minimal, with legal costs limited to obtaining the necessary licenses or permits.
- Complete control. Because you are the sole owner of the business, you have complete control over all decisions. You aren’t required to consult with anyone else when you need to make decisions or want to make changes.
- Easy tax preparation. Your business is not taxed separately, so it’s easy to fulfill the tax reporting requirements for a sole proprietorship. The tax rates are also the lowest of the business structures. This can include tax forms Schedule C (Small Business), Schedule E (Rental Properties), or Schedule F (Farms).
What are some disadvantages Sole Proprietorship?
- Unlimited personal liability. Because there is no legal separation between you and your business, you can be held personally liable for the debts and obligations of the business. This risk extends to any liabilities incurred as a result of employee actions.
- Hard to raise money. Sole proprietors often face challenges when trying to raise money. You cannot sell stock in the business, which limits investor opportunity. Banks are also hesitant to lend to a sole proprietorship because of a perceived additional risk when it comes to repayment if the business fails.
- Heavy burden. The flipside of complete control is the burden and pressure it can impose. You alone are ultimately responsible for the successes and failures of your business.
What will you find in TSAT’s Sole Proprietor Personal CFO vault?
As you can see, there are advantages and disadvantages of becoming a sole proprietor. TSAT’s Sole Proprietor Personal CFO vault provides you with FREE information and courses to help you with your venture!
Interested in learning more? Sign Up Below!
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