Benefits Of Sole Proprietorship
Sole proprietorship is an unincorporated business that is owned by an individual. You can also choose to organize your business as a limited liability company (LLC), corporation or partnership. If you choose to establish a sole proprietorship in Texas, you do not need to file legal documents with the Texas state government when forming a sole proprietorship. You can just begin operating.
How To Form A Sole Proprietorship
First you need to choose a business name which can either be your own name or a trade name. If you choose a trade name, you will have to file with the county clerk’s office. Make sure that the name you choose is distinguishable from other companies’ names. There are government databases you can use to make sure that the name you intend to use is not taken.
You should also make sure you get all the business licenses that you require to run your type of business. You may also need to obtain certain permits and zoning clearance that apply to your business. Ensure you register for an employer identification number (EIN) with the IRS if you plan to hire employees. Drafting a business plan can help you focus on the goals you have for your business and allow you to manage your assets and funds responsibly.
Benefits Of Starting A Sole Proprietorship
You don’t have to spend money on filing fees or costs when you are establishing a sole proprietorship because there is no required paperwork to file. You also don’t have to worry about paying payroll or unemployment taxes. The reason for this is that as the owner, you report the company’s income and expenses as your own personal self-employment tax. You also fully control the business and all the business profits come directly to you. Generally, a sole proprietorship is a simple and less expensive business organization. There are no partners or shareholders putting pressure on you on how to run the business.
Disadvantages Of Sole Proprietorships
Since a sole proprietorship is not considered a legal entity separate from the owner, the owner personally becomes liable for any debts the business incurs. That means that creditors can seize personal assets and even access personal accounts if the business cannot pay its debts. Apart from that, finding investors is also difficult because most investors want to share in the profits of businesses they invest in.
Banks also hesitate to lend to sole proprietorships because they know that they may not get their money back if a sole proprietorship fails. You also don’t get to enjoy tax deductions such as health insurance. It is difficult to maintain a work-life balance when you run a sole proprietorship because you are always busy and have no time for family or friends.
You Need A Business Lawyer
A business lawyer can explain to you the legal implications that you face when you are establishing a business entity. The lawyer can also help you avoid the mistakes that may cost you in the future when you are at the initial stages of establishing your business.