What is a sole proprietorship? A sole proprietorship is a simple form of business entity in which one person owns all of the assets of the business, called the "proprietor." If you were doing business under a different name, that name would be "d/b/a" (doing business as) after your name.
How do I set-up Sole Proprietorship? There are no filing requirements in state to be a Sole Proprietorship, however you may want to have an Employer Identification Number. The business also needs to get appropriate state, county and city licenses based on the business activity.
How much liability exposure do I have as a sole proprietor? Because a sole proprietorship is not a separate legal entity, the proprietor is generally responsible for all business debts and legal claims against the business. You may want to consult your legal counsel for further legal matters.
How is the sole proprietorship taxed? The income from the business is taxable to the proprietor and the proprietor reports the income on his or her Schedule-C of individual tax return, Form 1040. This income is also subject to self-employment tax.
Consult your tax advisor for further information and also to find out the most appropriate business entity structure suitable for your business activity before you start a business.
Among the options available in choosing your business entity, Partnership is another option. Let's have detailed understanding about a Partnership.
What is a Partnership?
A partnership is an association of two or more individuals or business entities, called partners, who own and operate a business together. There are two different forms of Partnership. (1) General Partnership (2) Limited Partnership.
How do I set-up a Partnership?
There are no filing requirements in the state to be a Partnership; however a Partnership needs to have Federal and State Employer Identification Numbers. The business also needs to get appropriate state, county and city licenses based on the business activity.
How much liability exposure do I have as a Partner?
Partners are generally responsible for all business debts and legal claims against the business in the case of a General Partnership. However in Limited Partnership, limited partners are responsible up to the amount of their investment in the Partnership. You may want to consult your legal counsel for further legal matters.
How is the Partnership taxed?
A Partnership is not a tax paying entity. The partnership passes its income or losses to its partners and partners report income or losses of their share on their individual tax returns. Income from the partnership may be also subject to self employment tax, depending on the business activities of the partnership and partner's participation in business.
Consult your tax advisor for further information and also to find out the most appropriate business entity structure suitable for your business activity before you start a business.
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