A sole proprietorship is a business that is owned by one person. It is the simplest type of business to start. There are several important features of a sole proprietorship. First, the business and the owner are considered to be one entity under the law. Second, all of the assets of the business are personally owned by the sole proprietor. Third, the sole proprietor is not considered an employee of the business. Because of this, the sole proprietor is not eligible for employment insurance if the business fails. The sole proprietor is not paid a salary, but instead can take money from the business through personal drawings.
Owning a sole proprietorship has several advantages and disadvantages, including important tax implications.
One of the advantages of being a sole proprietor is that you can be your own boss. You can make business decisions without having to ask anyone else. You also get to keep the profits from the business and you have the freedom to end your business whenever you want. A sole proprietorship is the easiest form of business to start. And, although you need to keep separate accounting records for the business, you only need to file one tax return.
Third, the Government requires corporations to maintain proper corporate records, called a minute book. A minute book contains the corporate bylaws and minutes from annual meetings.
Second, the registration and set up fees for a corporation are higher than the set up fees for a sole proprietorship or a partnership. Incorporating a business is also a more complicated process than starting a sole proprietorship or partnership. You should contact a lawyer to help you incorporate your business.
Finally, a corporation may appear more stable and sophisticated to the public. This may help you acquire new business.
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