Sole proprietorship

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Sole proprietorship

  1. 1. Sole Proprietorship
  2. 2. Sole Proprietorship • A sole proprietorship is a business established, owned, and controlled by a single person. • Sole proprietorships come in all shapes and sizes. • The owner realizes all the profits and assumes responsibility for all losses. • The sole proprietorship is the most prominent of the four forms of ownership.
  3. 3. Sole Proprietorship
  4. 4. Formation • Of the four forms of ownership, the sole proprietorship is by far the easiest to form. • The government exercises very little control over the establishment of new sole proprietorships. • Start-up can be immediate and simple. • You may need to obtain licenses or permits for your particular type of business.
  5. 5. Advantages • Sole proprietorships are simple to start. No formal action is required. • A sole proprietorship may be started immediately. • The owner has total control of all aspects of the business. • The owner receives all the profits. • The business itself pays no income tax; the owner pays income tax as an individual.
  6. 6. Disadvantages • The owner has unlimited responsibility for losses, debts, and other liabilities the business might develop. • The owner must make all the decisions. • The owner is the only person who can arrange financing or capitalization. • The existence of the business ends upon the owner’s death.
  7. 7. Operation • Sole proprietors make all the decisions regarding the operation of the business. • The assets of sole proprietors are not considered legally separate from the assets of the business. • Owners of sole proprietorships report business income and expenses on their personal income tax returns.
  8. 8. Federal Tax Forms Partial list of tax forms • Form 1040: Individual Income Tax Return • Schedule C: Profit or Loss from Business (or Schedule C-EZ) • Schedule SE: Self-Employment Tax • Form 1040-ES: Estimated Tax for Individuals • Form 4562: Depreciation and Amortization • Form 8829: Expenses for Business Use of Your Home • Employment Tax Forms

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