Starting a Business Quickly With a Sole Proprietorship
Many people dream of starting their own business but find the process daunting. They may think the process will be lengthy and confusing. Many processes can be complex, but if you opt for a sole proprietorship for your business, it will likely be easier.
In the United States, a sole proprietorship is the easiest business entity you can have. You don’t have to do anything complex to start your business. In some places, you may need a business license. Other than that, you won’t have to deal with any legal or tax complications, unlike starting a limited liability company (LLC) or corporation.
So once you have operations in place, you can pretty much start your business right then and there. You can declare your business as open and start taking orders right away. Sole proprietorship allows you to test the waters. You can see if your business model will work out without spending too much time and money on business startup costs. Here’s a look at what to expect.
Pros and Cons
As mentioned earlier, sole proprietorships are easy to set up. There is no significant time or money requirement. You don’t have to deal with the stuff that corporations have to do, such as pay corporate taxes and create and file annual reports. There is no double taxation or balance sheets to contend with. You won’t have to deal with board meetings, shareholder votes, and formal reviews. There is no formal business structure, making daily operations easier, especially in terms of recordkeeping.
While this may make sole proprietorships sound pretty good, it’s wise to be aware of the disadvantages as well. One major issue is that sole proprietorships have unlimited liability. You don’t have any protections that a corporation or LLC has, which means you are on the hook for all business expenses and debts, any product-related liability, injuries to customers, and civil damages if you are sued. In a sole proprietorship, your business and personal assets are intertwined, so you could lose everything on your own if you are sued or your business goes south.
Also, you must pay self-employment taxes, which can eat up a lot of profit. Sole proprietors are required to pay both the employer and employee portion of Social Security and Medicare taxes. The self-employment tax rate is currently 15.3%: 12.4% for Social Security and 2.9% for Medicare.
Another thing to consider is that you cannot structure your business as a sole proprietorship if you need outside investors. That’s because there’s no real business to sell. Plus, sole proprietorships can only have one owner. Otherwise, it becomes a partnership.
Learn More About Sole Proprietorship
Sole proprietorship is a simple business structure. It’s easy to implement and you can change it over time if you desire.
Orlando sole proprietorship lawyer B.F. Godfrey from Godfrey Legal can guide you through the process. We can answer your questions and help you understand the pros and cons. To schedule a consultation, call (407) 890-0023 or fill out the online form