Is A Sole Proprietorship Right For You?
Of all the different forms of business, the sole proprietorship is the simplest. Because it is a one-person business, it isn’t constrained by the same regulations as larger corporations. If you have the next great concept and are motivated to chart your course with a carefully thought out business plan, you may well be on your way to business ownership. You needn’t have a grandiose plan that will consume your every waking hour. Sole proprietorships consist of freelancers, contractors, and consultants to name a few. Many of whom work their businesses in their spare time.
The ease of starting a sole proprietorship is much less taxing than if you owned a larger company and had to cut through miles of red tape. You don’t even have to go through state registration as larger corporations do. Some cities do not even expect registration of only owned and run companies.
A headache many companies endure with quarterly taxes can be skipped over since you are only required, in most instances, to fill out a simple 1040. You probably won’t need an accountant for this. Many tax programs, including Tax Act Online, will even guide you through losses and profits, self-employed tax assumptions and more.
The advantages of sole proprietorships are vast:
- Starting or stopping with ease. To start with you may purchase the tools or equipment needed to get you off the ground running. Mary Kay business owners usually purchase what is called the Cadillac kit for under $500. With simple word of mouth and a few business cards they quickly see the return on their investment. For others, it requires a simple small office lease or power tools. Not loving it? Want out? Stop. It’s that simple. Pack it up, store it and walk away. You don’t have to sell out to a partner or vote on it. You simply quit.
- You answer only to yourself. It’s so much easier to get motivated for the day when you know you’re doing this for yourself. Sure, there will be mistakes along the way, but you only have to face yourself. And the rewards are sure to be great along with the way.
- Enjoying the luxury of being your boss. There is no greater motivation than knowing it is your name at stake. To know that it is within your power to singlehandedly ensure your success is eating.
- The heritage you leave behind. Generations of people after you will continue to build on your dreams and your success.
- It’s all yours. Next to being your boss, nothing feels greater than knowing it is completely within your power to earn as much or as little as you choose. The best part of that equation? You share all your profits with – you and only you (minus only the cut your Uncle Sam will take, but hey…)
- Work when you want, where you want, how long you want. It is completely up to you how many hours you choose to put into your business or when you cut your losses and walk away. Sole proprietorship means you are in charge; you make the decisions, including how long you continue your business.
- Write-offs. Tax Act Online will walk you through these too. Business meals, office space, tools, mileage…the write-offs are virtually endless.
- The bottom line. Larger businesses have the responsibility placed on them to pay into workman’s compensation, unemployment, higher taxes. As a sole proprietor, you are only responsible for you and your taxes are taxed as your personal income. While you will have to pay quarterly, this is a small price to pay and far outweighs the cons of business ownership.
- Ask around. You can learn from others mistakes and successes by simply speaking with other business owners. Chamber of Commerce meetings is a great place to meet business owners and learn from their experience so that you are better equipped for success with your business.
What Are The Benefits Of Starting A Sole Proprietorship Business?
Unlike a corporate business, a sole proprietorship is the most manageable and easy to run. In the sole proprietorship, you are your boss and governing state regulations are not as rigid compared to other forms of businesses. To start your own registered business, all you need is a winning idea, a well-made business plan, and you’re good to go. Starting a sole proprietorship does not involve writing corporate bylaws or an inch solid business plan. If you’re a freelancer, consultant, baker, caterer, etc., you can start your own business in practically no time at all.
One major advantage of a sole proprietorship is the ease of tax regulations. Unlike a corporate business where you need to set up a separate tax form for the business alone, a single proprietorship business tax is your personal income tax already. You also don’t have to bother registering your business to multiple government regulatory offices. Some states even allow you to go into business first and register later.
A single proprietorship business tax can be taken care of by filing a 1040 form. You don’t have to bother filing a separate quarterly tax payment schedule like corporate businesses do. Your tax report doesn’t even have to be elaborate. You can just use online tax software such as Tax Act Online to compute your taxable income – and you’re entitled to all self-employed tax exemption benefits given by the government also.
Consider the following points to see if the sole proprietorship is the right business form for you.
- It’s easy to start, easy to stop. To start doing business, all you need are proper equipment, a comfortable office space, and fixtures perhaps, and you’re good to go. Many happy mothers doing business at home bought only the $500 Mary Kay kit to begin. Depending on your skills or business concept, you may just need a new oven and a power mixer to start selling wedding cakes from your kitchen. If you feel that the business is not working for you, then you stop. You don’t need to bother calling partners or batting heads in a conference room to dissolve the business. You simply pack up and leave.
- You owe nobody anything. For some people, they can perform well if they’re not worried about fulfilling obligations to other people. No matter what you do in your business, you get a peace of mind knowing that you don’t owe anyone an explanation regarding any outcome.
- You are your boss. Perhaps this is the greatest common to people to start a sole proprietorship business. If you own your source of employment, you don’t have a boss to suck up to. You can breathe easier knowing that you have full control over your destiny.
- You have a good legacy to leave your children. The benefit created by your business doesn’t have to end when you retire. You can leave the business to your children, which they can build on based on your legacy.
- You take home whatever you make. Did you ever get that feeling while working for somebody that his business will crumble without your help? And yet you don’t even get to take home the proper compensation you deserve. With your own business, you can take full control of your income; you can make as much or as little as you want; it’s up to you.
- Enjoy flexible hours and work arrangement. If you are your boss, it’s up to you if you want to work as much as 10, 8, or 2 hours a day, you only have yourself to answer. You can even work in your pajama if you want to; nobody cares if your office is your kitchen.
- Enjoy the tax write-offs. If you own your business, you get to enjoy the write-offs accorded to you and your business. Online tax software like the Tax Act Online can give you a full list of tax deductible items such as gas mileage, office equipment cost, representation expense, and more.
- Less responsibility. If you have fewer people helping you in the business, you don’t have to worry about giving them full benefits like medical and dental insurances; it’s all up to you if you want to give them these benefits. Unlike corporations also, you don’t have to worry about double taxation in a sole proprietorship. Although you still have to pay your quarterly income tax, you can skip long red tape by filing only one form; your 1040 form.
Now that you’re convinced that the sole proprietorship is the best business form for you, what’s there left to do? Start your own business! Brush elbows with other businessmen and women who started ahead of you and learned from their experience. Join the chamber of commerce meetings or business expos to get ideas for your next source of employment, the one with your name on the registration form.
About Krystal Eagle
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