Posted about 2 months ago

A Piece For Entrepreneurs Looking To Create A Sole Proprietorship

I submitted a response to a HARO request on sole proprietorships, and I thought it would be a good addition to my blog. If you have any questions, please let me know.

What is sole proprietorship:

A sole proprietorship is when an individual begins using their efforts to perform business activities in hopes of earning more money than they're paying for materials required to run that business.

What are the steps to starting a sole proprietorship:

  • Saying “I’m in business”.
  • Performing that business activity.
  • Filing a "Doing Business As" (DBA) with your county courthouse. This creates a pubic record showing that you are performing work using that business name.
  • Acquire business liability insurance.

What options should you consider outside of a sole proprietorship:

  • Limited Liability Company
  • Limited Partnership

These limit your liability exposure when created correctly so that your assets aren’t exposed if something goes wrong. Have an attorney file the articles for you so you know they’re done correctly.

What are the pros and cons of a sole proprietorship:

Pros

  • Easy to start
  • Basically free
  • It’s your own business

Cons

  • Being in business is a lot tougher than working for someone else
  • You, personally, are liable. You are your business and if someone breaks their leg in your restaurant or is injured as a result of your business activities, your personal assets (car, house, etc) are fair game for the suit. They could take everything that your liability insurance won’t cover.

What are the tax implications of registering as a sole proprietorship:

As a sole proprietor, you’ll be required to pay self-employment tax. You’ll be able to write off most, if not all, of the items you need to run your business as well. If you’re investing in real estate under a sole proprietorship, speak with your CPA about the tax advantages that you should be utilizing.



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