Starting A Business Sole Proprietor Or Corporation

Starting A Business Sole Proprietor Or Corporation



Starting a​ Business: Sole Proprietor Or Corporation?
When starting a​ business,​ it​ is​ important to​ consider the​ potential tax and legal issues .​
Most people choose a​ sole proprietor as​ their business type when starting out .​
Starting your business as​ a​ sole proprietor does not require any special paperwork from the​ IRS .​
Which is​ exactly why most people start out this way .​
Being a​ sole proprietor means that you and the​ business are one and the​ same .​
According to​ the​ IRS:
A sole proprietorship is​ an​ unincorporated business that is​ owned by one individual .​
It is​ the​ simplest form of​ business organization to​ start and maintain .​
The business has no existence apart from you,​ the​ owner .​
Its liabilities are your personal liabilities .​
You undertake the​ risks of​ the​ business for all assets owned,​ whether used in​ the​ business or​ personally owned .​
You include the​ income and expenses of​ the​ business on​ your own tax return.
However,​ even though a​ sole proprietorship is​ the​ simplest way to​ set up your business,​ you still need to​ follow your local business regulations to​ make your business legitimate .​
And you are personally responsible for paying both income taxes and business debts .​
So,​ is​ being a​ sole proprietor the​ right business structure for you?
For most home business,​ in​ the​ beginning,​ yes .​
If you choose to​ start your business as​ a​ sole proprietor,​ you do have the​ option of​ incorporating as​ your business grows .​
What is​ the​ difference between a​ sole proprietor and corporation?
Unlike a​ sole proprietorship,​ a​ corporation is​ a​ legal entity in​ which the​ individual and business are separate .​
The great thing about incorporating is​ taht the​ corporation protects you from personal liability for business debts .​
For example,​ if​ your business gets sued,​ your personal assets are safe,​ for the​ most part .​
And,​ you may be able to​ save a​ significant amount of​ money in​ taxes by incorporating .​
If you decide to​ incorporate,​ there are several options:
• S Corporation
• C Corporation
• LLC (Limited Liability Corporation)
Before incorporating,​ it​ is​ a​ good idea to​ check with the​ IRS and your tax professional first .​
Setting up a​ corporation is​ more complicated - and may not be right for your business!




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