Starting a business in Florida can be a monumental endeavor. Choosing a business structure is one of the most important decisions any entrepreneur can make prior to starting a business. While there a multitude of options for new business organizations, many people choose to go with a sole proprietorship.
The advantages of a sole proprietorship
There are several advantages to running your small business as a sole proprietorship. These advantages may include:
- Easy startup: A sole proprietorship requires far less paperwork to get started than other types of business structures. While you may require a business license or permit to start your business, depending on governmental regulations in your area, you generally will not have to register your business with the state.
- Straightforward tax requirements: Wit a sole proprietorship, you are not required to file for an employer identification number (EIN). Instead, you can simply use your Social Security number. Your sole proprietorship is considered a “pass-through” entity for tax purposes. That means that you will report business gains and losses on your personal tax returns, rather than filing taxes separately for the business. You may also be able to deduct 20 percent of your business’s net income from your taxes, under the Tax Cuts and Jobs Act of 2017.
- Sole ownership: Other business structures require the involvement of other parties, including company officers. As a sole proprietor, you have full control over all business-related decisions.
- Less costly: Unlike LLCS and other structures, sole proprietorships do not require you to pay yearly registration fees.
- Personal banking: You may use your own personal bank account to make business payments, rather than having to start a separate checking account for your business.
Many new businesses start out as a sole proprietorship, due to the ease of formation and convenience. However, there are some disadvantages associated with sole proprietorships. One of the main disadvantages has to do with a lack of liability protection. As a sole proprietor, you are considered self-employed and are therefore personally liable for any of your business’s debts. Creditors will likely be able to seize your personal assets to cover business debts.
