A Sole Proprietorship is a business model that allows for only one owner. All responsibilities of the business, including all monetary means come from the business owner. All profits and losses are reported on the owner’s personal tax return. A sole proprietorship is the most common of all the business forms; many businesses actually start as sole proprietorship and evolve from there. One of the main disadvantages of a sole proprietorship is that all liability is the responsibility of the owner. Here are some characteristics of sole proprietorship and some of their liabilities.
All liability for a sole proprietorship is the responsibility of the owner. If there is an accident then all the costs would come from the owner. In most cases insurance policies will cover the majority of any claims that might be made. If there are other damages that need to be covered then the owner’s personal possessions and assets will be utilized.
A sole proprietor, according to DOS.NY.GOV is personally responsible for all income tax on the business. The taxes are filed on the owner’s personal tax return along with any reports of profits or loss. When a company is first starting up it is more than likely going to have a loss. These losses will help to balance the taxes' liability of the business owner.
The owner maintains control over the whole organization. If there is a decision to be made on the stationary of the business or what equipment is needed to run the business, then it will be made by the sole owner. All profits are the owners to do with as they wish. All profits must be reported on their personal tax return.
The Convenience or Burden of a sole proprietorship is specific to each business. A sole proprietor may find that they enjoy the convenience of running their own business and making their own decisions. They may also find that the burden of making all the decisions and being in charge financially is a stress that may cause them to take on a partner or incorporate. Either choice would result in access to capital as well as, in some cases, someone else to help make the decisions. A Sole Proprietorship has many advantages and disadvantages. Many people succeed as sole owners in their business, while others move on to a different business model.