It's estimated that sole proprietorships account for around 80 percent of the businesses in the United States. They're certainly an attractive option because they're less complicated than other business structures, and they are ideal for small businesses operated by an individual or even spouses. Despite their popularity, they're not the only option, nor are they always the best. However, they are usually inexpensive to start and maintain, and are the least complex of the many operating methods available -- you don't even need to hire an attorney to start one.
A sole proprietorship exists only during the life of its owner, and so arrangements must be made from the very beginning as to what happens to the company. In addition, the company and its assets are considered the personal property of the owner, rather than as an independent entity. Sole proprietorships for beginners resources include:
- A look at the pros and cons of sole proprietorships.
- Checklists to help you get started as a sole proprietorship.
- Information on the tax structure of a sole proprietorship.
Weigh the pros and cons of operating as a sole proprietorshipBefore setting up a sole proprietorship, research what it means and what the advantages and disadvantages are. Once you've determined this model is compatible with your planned business, you can begin researching and taking the steps needed to form one.
Learn what you need to do to get started as a sole proprietorshipStarting a sole proprietorship is less complicated than starting many other types of businesses, but there may still be several local, state or federal forms you need to file. You may also need to apply for licenses or permits within your city or state.
Small Business Administration also offers a guide to researching licenses and permits.
Research the tax responsibilities associated with a sole proprietorshipSole proprietorships are taxed differently than other business structures. Income earned by the business is considered the business owner's income, and must be reported on his or her personal tax return. The business owner can also claim business expenses as deductions on his or her personal tax return.
Internal Revenue Service offers a guide to what forms you'll need and how to file them on its website.