Benefits and Advantages of Proprietorship Firm for Startups
What Is a Sole Proprietorship?
A sole proprietorship is a simple type of business structure that is owned and operated by the same person. It does not involve many of the complex filing requirements associated with other types of business. Sole proprietorship allow persons to report business income and expenses on their individual tax returns.
Sole proprietorships are attractive to small investors because they are relatively easy to start up. Also, the owner is entitled to all the profit. On the other hand, sole proprietorships can be risky because there is no separation between the owner and the business.
In other words, the owner remains personally liable for any losses or debts that the sole proprietorship incurs. They can also be held legally responsible for violations committed by the business or its employees.
Ease of Formation: Starting a sole proprietorship is much less complicated and also much cheaper.
Tax benefits: The owner of a sole proprietorship is not required to file a separate business tax report.
Employment: Sole proprietorship can hire employees.
Decision making: Control over all business decisions remains in the hands of the owner.
Liability: The business owner will be held directly responsible for any losses, debts, or violations coming from the business.
Taxes: While there are many tax benefits to sole proprietorship, a main drawback is that the owner must pay self-employment taxes. Also, some tax benefits may not be deductible, such as health insurance premiums for employees.
Business Continuity: The business does not continue if the owner becomes deceased or incapacitated, since they are treated as one and the same. Upon the owner’s death, the business is liquidated and becomes part of the owner’s personal estate, to be distributed to beneficiaries. This can result in heavy tax consequences on beneficiaries due to inheritance taxes and estate taxes.
Raising capital: Since the initial funds are usually provided by the owner, it can be difficult to generate capital.
Start your proprietorship Firm with firstmancorp.com because we serve you beyond your satisfaction.
Siva Subramanian C
FirstMan Corporate Services LLP
Chennai - India
+91 97878 97000