Why Are Individual Proprietorships the Most Frequent Configuration of Function Ownership?
Individual proprietorships are the most customary formation of occupation, with else than 23 million tribute returns filed from this type of complication in 2007. This is as other field types, such as corporations and resident liability companies (LLCs), can add to the payment and perpetuation of running a occupation. Allow for the details of continuance a Individual proprietor in the action of your type of trouble to arbitrate provided a Individual proprietorship makes impression for you.
The Facts
Individual proprietorships are unincorporated businesses with one owner. Keep in mind that banks require personal guarantees, and the approval process considers both you and your business. An equity line of credit on your home provides you with low interest rates and often has a higher limit than a bank line of credit for your business. Family and friends may provide loans with favorable terms besides.
Expert Insight
You also may be required to register or obtain a business license in your state.Function
Sole proprietorships serve a large market of small businesses, especially home-based businesses. According to the Internal Revenue Service (IRS), the number of sole proprietorships is on the rise, increasing more than 4 percent from 2006 to 2007. Businesses of little complexity and nominal revenue appreciate the minimal effort required to preserve sole proprietorships.
Benefits
The ease and minimal cost of opening your business is one of the primary reasons for the sole proprietorship's popularity. You also maintain control and management of your company. Your sole proprietorship is limited to one owner by law, avoiding potentially sticky partner and shareholder disagreements. Sole proprietorships file a Schedule C with a Form 1040 individual tax return, reducing the cost of income tax preparation. Dissolving a sole proprietorship venture is easy and affords you the ability to function several businesses without large legal, start-up and dissolution expenses.
Funding Issues
Sole proprietorships have little ability to raise capital with investors, though creative solutions exist to finance growth in your sole proprietorship. You are not limited to acquiring capital from investors. Banks finance sole proprietors with term loans, lines of credit and equipment financing. As a Individual proprietor, you are not distinguished from your episode, which resources you are your line from a legal and toll perspective. No formation documents or legal documents are required to create calling as a Individual proprietor, if you are using your label. Choosing to utilize a Commerce alias requires registration with the Secretary of Authority in your environment.
Businesses you start slowly or on the side are excellent candidates for sole proprietorship. A sole proprietorship can always be dissolved and formed as a limited liability company or a corporation. Businesses selling tangible products with low costs are prime candidates for sole proprietorship because of the minimal legal exposure. You must consider your product or service and determine whether legal liabilities exist. For more information on your specific situation, consult a native business attorney.
