Sole Proprietorship2021-05-14T17:00:28-04:00

Giving Options to
Sole Proprietorships.

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The Challenges of a Sole Proprietorship

SOME OF THE MOST COMMON HURDLES YOU MAY ENCOUNTER

No Liability Protection

Without a proper business entity, there is no personal protection against any liability or debt your business accrues.

Taxes

As a sole proprietor, you will pay a self-employment tax in addition to paying income tax for any business profits.

Investing Hardships

Growing your business poses issues since sole proprietorships can’t issue shares or have multiple owners.

Business Name

With just a sole proprietorship, you are technically doing business under your name, not any official business names.

Is A Sole Proprietorship My Best Option?

Types of Business Entities

FIND THE ENTITY THAT IS RIGHT FOR YOU

 

Features

Protections & Taxes

Negatives

LLC

Allows the most flexibility in terms of management and structure

Can have unlimited members

Can be owned by another LLC, corporation, or any other legal entity

Protects personal assets and liability from lawsuits

Offers pass through taxation for business owners

Requires separate tax filings

Will require regular fees and forms to maintain

Can’t go public

Not recognized internationally

S-Corp

Allows for issue of shares

Shareholders must be US residents

Owners only get common stock

Protects personal assets and liability from lawsuits

Offers pass through taxation for business owners

Requires separate tax filings

Will require regular fees and forms to maintain

Requires a firm structure, with a board of directors

Must keep records and hold annual meetings

C-Corp

Allows for issue of shares

Owners can get preferred stock

Best option to eventually go public

Protects personal assets and liability from lawsuits

Taxed at the corporate level and at the personal level

Requires separate tax filings

Will require regular fees and forms to maintain

Requires a firm structure, with a board of directors

Must keep records and hold annual meetings

Sole Proprietorship

Doesn’t require any setup or fees

Can only have one owner

May still require licenses or forms, depending on state regulations

There is no personal liability protection

Only taxed on a personal level

Can complete taxes without a separate filing

No limited liability protection

No company structure or organizing documents

Limited business rights

Features

Allows the most flexibility in terms of management and structure

Can have unlimited members

Can be owned by another LLC, corporation, or any other legal entity

Protections & Taxes

Protects personal assets and liability from lawsuits

Offers pass through taxation for business owners

Requires separate tax filings

Negatives

Will require regular fees and forms to maintain

Can’t go public

Not recognized internationally

Features

Allows for issue of shares

Shareholders must be US residents

Owners only get common stock

Protections & Taxes

Protects personal assets and liability from lawsuits

Offers pass through taxation for business owners

Requires separate tax filings

Negatives

Will require regular fees and forms to maintain

Requires a firm structure, with a board of directors

Must keep records and hold annual meetings

Features

Allows for issue of shares

Owners can get preferred stock

Best option to eventually go public

Protections & Taxes

Protects personal assets and liability from lawsuits

Taxed at the corporate level and at the personal level

Requires separate tax filings

Negatives

Will require regular fees and forms to maintain

Requires a firm structure, with a board of directors

Must keep records and hold annual meetings

Features

Doesn’t require any setup or fees

Can only have one owner

May still require licenses or forms, depending on state regulations

Protections & Taxes

There is no personal liability protection

Only taxed on a personal level

Can complete taxes without a separate filing

Negatives

No limited liability protection

No company structure or organizing documents

Limited business rights

Frequently Asked Questions

If you’re trying to decide if a sole proprietorship is the smartest choice for your business, look through these frequently asked questions. To find out the best options for your business, ask one of our attorneys today. 

How Do I Become a Sole Proprietor?2021-01-28T14:16:42-05:00

From the moment you start doing business, without an official business entity, you are a sole proprietor. As implied by the name, a sole proprietor is the only owner of the business, so there can be no shareholders or co-owners. To do business lawfully, some states requires licenses, fees, or permits from sole proprietors. To know what’s required of you as a sole proprietor, it’s best to speak with an attorney so you can be sure your business is on the right path.

How do I register my business name as a sole proprietorship?2021-01-28T14:17:23-05:00

When your business is operating as a sole proprietorship, it is operating under your personal name. Whatever name you want for your business would have to be registered as a DBA, or doing business as. A DBA is the business equivalent of a nickname, in that it informs the state of another name your business is operating under. Another way to secure a name for your business is to create an official business entity, such as an LLC or corporation.

Can I change my sole proprietorship into an LLC or corporation?2021-01-28T14:18:05-05:00

Yes, you can absolutely form an LLC or corporation our of your business. Because a sole proprietorship is so limited, many business owners create LLCs or corporations so they can add co-owners, distribute shares, or go public. Contact our office to get the process started for you right away.

How do I open a business bank account?2021-01-28T14:18:30-05:00

You may have some trouble opening a business bank account without an EIN. Most sole proprietorships don’t have an EIN because they aren’t hiring employees. If you want to remain a sole proprietorship, you can often open a separate bank account, dedicated to your business, with your social security number.

Have An Attorney Answer Your Questions

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