Sole Proprietorships

The vast majority of small businesses start out as sole proprietorships. These firms are owned by one person, usually the individual who has day-to-day responsibilities for running the business. Sole proprietors own all the assets of the business and the profits generated by it. They also assume complete responsibility for any of its liabilities or debts. In the eyes of the law and the public, you are one in the same with the business.

Some Advantages of a Sole Proprietorship

• Least costly and easiest form of ownership to organize and manage.
• One person owns and is in total control, and as allowed by law, makes decisions as they choose.
• The owner receives all income generated by the business, and profits are reported on the owner's personal tax return.

Some Disadvantages of a Sole Proprietorship

• Owner has unlimited liability.
• Owner is legally responsible for all debts against the business.
• Owner's business and personal assets are at risk.

Some of the Federal Tax Forms Used

• 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