Small Business Basics – Solicitorships
A sole proprietorship, also called a sole proprietorship, or simply sole entrepreneurship, is an abnormal form of business where only one person owns and runs the business. This means that the business is legally separate from and has no stake in any other businesses or individuals. The sole proprietor has exclusive control over the business operations and can do so alone. There are advantages and disadvantages to this type of business structure.
One of the main advantages of sole proprietorship over corporation is that it allows for flexible financial options. In a sole proprietorship you have complete control over your business operations and can determine your own working capital requirements. You also have the ability to establish a working capital short line of credit by using your business credit card. In addition, the business name is your business name and you can use it to conduct business as you wish.
A sole proprietorship cannot legally carry any debts on its books. In most cases, the debts are conducted through the business credit card and are paid with profits. This enables the owner to avoid debts, both small and large. However, when debts do accumulate the owner must first give notice to the other owners or partners of the debt. If the debts are carried on behalf of others, the sole proprietorship owner has no liability for these debts.
Another advantage of sole proprietorship is that it has many tax benefits. All income and expenses are reported individually. The owner reports only those items that he or she actually earned and expenses. It is possible to deduct expenses, although this may be the only tax benefit available under this business structure. These advantages may offset some of the disadvantages associated with this business structure. It is important, however, to ensure that all tax laws are followed and that all deductions are properly documented and claimed.
When it comes to the profit and loss statement, the only disadvantage of the sole proprietorship is that it may not accurately reflect the income of the business. The statement will only show the income earned and expenses incurred, nothing more. Due to the fact that the sole proprietorship business structure does not have a partner, there may be an inability to pass profits on to other owners. This may result in the lack of payment of social security taxes to the other owners. Some small businesses use the services of professionals who prepare these statements on their behalf. However, the owner must prepare and submit the annual return.
As with other business entities, sole proprietorship has its advantages and disadvantages. It is important, however, to ensure that the advantages and disadvantages are balanced. Sole proprietorships are particularly popular in small businesses because they are easy to operate and have few if any risks. In addition, the advantages of a sole proprietorship allow owners to control multiple assets without having to pay capital gains taxes.