The Advantages of Sole Proprietorship
Conducting businesses as a sole proprietors will bring two tax advantages. These advantages happen because the law has no distinction between your business and you.
The first advantage is being able to evade double taxes. Double tax basically means, it occurs if you run your business through a corporation rather than through a sole proprietorship. Corporations pay income tax differently while its owners pay a different portion. Double tax can happen when you and your business both must pay taxes through the same income. For example, as a sole proprietor, you will not have to pay double tax on your business income because the law does not differentiate the sole proprietor and the sole proprietorship. As a sole proprietor, all your business income is considered as your personal income.
The second tax advantage of sole proprietorships is that you can deduct your business losses to the amount of one’s total income that you may have from all sources, including interest, dividends, and gains from the sale of property which are non-business related. For example, if you are married and have filed a joint tax return, your business losses will be able to counterbalance your spouse’s income as well. Your ability to deduct losses as a sole proprietor may be able to lessen your family’s total income tax burden and may be of use during an uprising or downturn point of your company.
Other than that, another advantage of sole proprietorships is that a sole proprietor has complete control and decision-making power over the business. The owner has a high degree of freedom and flexibility of making decisions. The owner also can also fully transfer the sole proprietorship at any time as they deem necessary. For example, an owner can set his own rules and change them in his business.
The first advantage is being able to evade double taxes. Double tax basically means, it occurs if you run your business through a corporation rather than through a sole proprietorship. Corporations pay income tax differently while its owners pay a different portion. Double tax can happen when you and your business both must pay taxes through the same income. For example, as a sole proprietor, you will not have to pay double tax on your business income because the law does not differentiate the sole proprietor and the sole proprietorship. As a sole proprietor, all your business income is considered as your personal income.
The second tax advantage of sole proprietorships is that you can deduct your business losses to the amount of one’s total income that you may have from all sources, including interest, dividends, and gains from the sale of property which are non-business related. For example, if you are married and have filed a joint tax return, your business losses will be able to counterbalance your spouse’s income as well. Your ability to deduct losses as a sole proprietor may be able to lessen your family’s total income tax burden and may be of use during an uprising or downturn point of your company.
Other than that, another advantage of sole proprietorships is that a sole proprietor has complete control and decision-making power over the business. The owner has a high degree of freedom and flexibility of making decisions. The owner also can also fully transfer the sole proprietorship at any time as they deem necessary. For example, an owner can set his own rules and change them in his business.