Advantages of Running Your Business as a Sole Proprietorship

When you go into business for yourself, you either have a choice of forming a partnership, where you hire other people to work with you or to run the business as a sole proprietorship, where you handle all aspects of the business by yourself. While there are risks involved with this type of operation, there are also benefits.

You have the freedom to make any business decisions for your business. For example, if your business is doing well and you want to expand or add an additional product or service, you do not have to seek approval from other joint owners. Normally, in a joint partnership, a board meeting would be held. If the board decides against expanding a business, they have the final say. In other words, when you are the sole-proprietor, you have the final say in all the business decision-making.

If you are the sole proprietor, you can enjoy the total success of the business without having to share it with others. Even though you will be paying for the expenses that your business entails, you will also be taking in all of the profits. Even though you will be putting in long hours each week and not seeing a profit for the first few years, in the long run you will be reaping in the rewards.

The paperwork that is involved with a sole proprietorship is not as complicated as that involved with a partnership or a corporation. For example, you will not be handling a payroll since you are the only employee. However, if you have children who are under the age of eighteen, you can pay them an allowance for them to help you out. As long as they get less than $5,000 a year, you do not have to pay a payroll tax. You also do not have to worry about healthcare expenses, except for yourself and your family. All you need is a ledger that tracks you assets and liabilities (profits and expenses).

Filing taxes with a sole proprietorship is simpler than if you are operating a partnership or corporation. You would be using a Schedule C to file your taxes. This is a simple tax form compared to those that are filed through a partnership or a corporation. You can also take advantages of tax deductions such as medical expenses, cell phone expenses and travel expenses. However, make sure that you keep you receipts in case you are ever audited.

There are many risks when you decide to go into business for yourself. This is true whether you form a partnership or a self proprietorship. In order for you to decide whether to forward with your business, you must determine if the advantages outweigh the risks.

References

SBA.gov

Allbusiness.com