Considering becoming a business owner? One option to consider is being a sole proprietor. Sole proprietors have complete control over their small business, benefitting from all of its profits while facing minimal start-up costs and operational hurdles. As an unincorporated business owner, you have the freedom to make all decisions and are personally responsible for any legal actions or debts that may arise.
Despite its simplicity, becoming a sole proprietor has both advantages and disadvantages. On one hand, the low start-up costs, flexibility, tax treatment, simplicity, and privacy are appealing. On the other hand, personal assets are at risk, self-employment taxes can be a burden, access to capital may be limited, and there’s a lack of continuity if something happens to the owner.
If this structure sounds like something you could get behind, consider the examples of successful solopreneurs who have turned unique ideas into profitable enterprises. Sara Blakely, Pierre Omidyar, and Andrew Carnegie are just a few examples of how solo entrepreneurship can lead to extraordinary achievements in business.
To get started on your sole proprietor journey, follow these steps: choose a business name, obtain necessary permits, licenses, and tax IDs, open a business bank account, and consider purchasing business insurance. When it comes to filing taxes, sole proprietors must treat business income like any other income they have earned and report it on their personal tax return.
Make sure to properly account for self-employment tax and personal income tax, which are the main taxes that sole proprietors must pay. To ensure you stay on top of any changes to tax laws, regularly research and stay informed about current rates.