The sole proprietorship is an unincorporated business owned and run by one person – with zero distinction between the owner and the business. The sole proprietor enjoys all the profits and is personally responsible for all business liabilities, losses, and debts. A sole proprietorship is one of the latest expensive business structures to start.
Think about it, just one person, owning a business all by himself, the legal requirements are as basic as it can get, and all the profit that the business offers. Similarly, if things go south, just that one person gets to take care of all the mess. But a sole proprietorship is a well-intentioned model for small business owners who don’t intend initially to derive large profits. In short, it is great if you are thinking about operating a small business.
Sole proprietorship and small businesses
Most people consider the sole proprietorship and its owner identical. A sole proprietorship can be defined as a small business when it comes to succeeding for small business health insurance. Still, if you have no workforce but yourself, your sole proprietorship will most likely not qualify for a group plan.
Sole proprietors can hire people, just like any other small business owner. According to the IRS, any time a sole proprietor employs someone other than an independent contractor.
Although being a sole proprietorship is the simplest form to structure any small business, you may be a little unsure of how being one affects the health insurance options. If a sole proprietorship has a few employees, it might qualify for group health insurance.
Let us take a look at the defining characteristics of a sole proprietorship:
- No corporate entity exists
- Ownership by one self-employed individual
- The owner remains responsible for liabilities and business assets
- The owner is an extension of its business
A good business practice
As the owner in a sole proprietorship, you get to make all the decisions and call all shots. You have no partners to consult with or some board of directors to discuss with either. You will also have personal liability protection. Just like that, there are multiple benefits of a sole proprietorship; let us discuss:
Believe it or not, at some point, sharing business ownership can be very difficult, even if you think that you get along with your co-owner pretty well. When you are the only one managing and making all the decisions, you are not responsible for other people’s mistakes. It’s like a one-person show – you have the spotlight, and you get to do whatever you feel like.
You get to choose how many days your business will operate and which times to come in; plus, you are held responsible for your work by yourself and the clients. With complete ownership comes a complete hold of profits. You get to enjoy all the profit you make, and it is your decision where you use it.
A simple process to kickstart
Typically, a business owner’s job when forming a sole proprietorship is to register with the local office and obtain necessary licenses. A sole proprietorship does not need legal counsel to build a business, which helps reduce costs. As a sole proprietorship, you can file a business name but don’t have to do it. Business owners who operate a sole proprietorship can visit their local business and start working, which is simpler than any other business structure.
Most businesses are built because one person comes up with a great idea and takes the initiative right away. To start a sole proprietorship business in the United States is a huge advantage to the business owner because of the ease of starting one.
You are already connected with your business when you are the only person dealing with all business matters, which is why you don’t have to file business taxes separate from your income taxes. The business income is your income, so a personal tax return and a tax form (Schedule C) allow one to report income and losses to the IRS using the SSN. In addition to all your business-related expenses, they are tax-deductible, including the cost of travel, goods, expenses, and more. The tax rates are lower for sole proprietors than corporations and partnerships.
All in all
Sole proprietorship allows people to open their businesses with complete ownership and responsibility for their success and failures. However, it’s essential to remember that starting and then operating a business can be equally stressful and hard as it is rewarding.
Even if you believe that sole proprietorship is the best option for you, surround yourself with positive energy and great support from other business owners; local business centers can also help you thrive in operating and growing the business.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.