Sole Proprietorship By: Mike Haworth

What is a sole proprietorship Simplest form of business Very popular for its ease of setup Business is the same legal entity as the owner Owner is responsible for their own debt power-comes-great-responsibility jpg

What are the other types? Partnership: Two or more people, no paperwork to file, personally liable LLC: Limits personal liability, pay taxes with personal taxes Limited partnership: Complicated, cost a lot of money, one person runs it but another is liable and pays for it Corporation: Business is its own legal identity, separate from people who own it Cooperative: Informal, easy to set up, equal content/uploads/2014/11/StartMyOwnBusiness.jpg?r esize=600%2C400

How a sole proprietorship works A person registers a business under a sole proprietorship A person can name the business whatever they like All taxes on the business are put on the individual A person can sue the business by suing the individual The individual is completely liable es/default/files/imce/iconHowItWorks.pn g

Steps to creating one Decide on the business name Check to make sure that business name is open Register your businesses name Get business licenses and permits from federal, state and local governments Profit-Revenue-LED-Light-Sign.jpg

How do you register? Depending on state, you may have to register with either the Secretary of State or on a county level It’s not a bad idea to trademark your business name The legal name of your business will be your name, that’s why it’s important to register a fictitious name instead of using your actual name If you’re unsure about anything, just go to your county clerk trademark-symbol.gif

Advantages Individual has complete control Individual can sell what they want, when they want Minimal legal costs to create Few requirements Ease of set up Name flexibility peg

Disadvantages Individual can be held responsible for debts Individual holds liability for employees All decisions are up to the individual Investors typically won’t invest in a sole proprietorship Few fringe benefits

When to set up a sole proprietorship Setting up a small business without too many assets Starting a service out of your home Starting up an independent contractor Wanting to run a business by yourself manage-as-a-sole-proprietor-1920x800.jpg

When not to use one Starting up a large company Starting up a company with a lot of assets Intentions of growing into a national/international company Starting up a “Risky” business Not wanting to posses all liability and responsibility om/2014/08/red-x.jpg

Financing Small Business Administration (SBA): Offers a large variety of loans Private Investors: Not likely, but possible Grants: Grants available if a company meets certain criteria 2.jpg

Loans Loans are available for: Expansion Disasters Exportation Veteran and Military Special Purpose (Pollution Control)

What’s up with taxes? It’s needed to report losses and gains to IRS Taxed on all profits from the business, minus expenses Ability to write off certain items that are assets to your business Individual must set aside money specifically for taxes Self-Employment Tax

Insurance Errors and Omissions Insurance: Helps take some of the liability off of the individual when it comes to financial harming another company General Liability: Takes some of the weight off of the sole proprietor that covers injury and property Health Insurance: Since you are your own business, you will need to make sure you have your health insurance taken care of

Sources How Sole Proprietors Are Taxed | Nolo.com. (n.d.). Retrieved April 27, 2015, from html Nickels, W., & McHugh, J. (2008). Understanding business (8th ed.). Boston: McGraw-Hill Irwin. Sources of Finance for a Sole Proprietor. (n.d.). Retrieved April 27, 2015, from The Average Cost of Insurance Coverage for a Sole Proprietor Business. (n.d.). Retrieved April 27, 2015, from insurance-coverage-sole-proprietor-business html