Always seek out information pertaining to your jurisdiction before you make a decision.
The sole proprietorship is a very common choice for businesses owned and operated by just one individual.
With a sole proprietorship, business earnings are taxed just once. With many other business structures, money is first taxed when it is in the company and then taxed again when it is paid out to the owner.
With a sole proprietorship, income and expenses pertaining to the business are included on your personal income tax report. The profits and losses of the business are recorded on a special tax form, but you file it along with your personal tax return. The bottom line amount from the business tax form is transferred to your personal tax return.
This means that losses caused by the business can be used to offset income earned from other sources.
With a sole proprietorship, you typically pay annual self-employment tax and quarterly estimated tax on your income.
The U.S. federal government allow you to pay estimated taxes in four equal amounts throughout the year: on 15 April, 15 June, 15 September and 15 January.
With a sole proprietorship, you are personally liable for the company’s liabilities.
Example: If the company gets sued and loses the case, you can be forced to use your personal assets to pay.
Generally speaking, it is extra difficult to be approved for loans and get investments as a sole proprietorship. You might for intance be required to put your home as equity for the loan.