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A Sole Proprietor may elect to do business under a fictitious name. This is not as sinister as it sounds; it simply means the person in question is doing business under a registered trademark. For example, John Smith may have named his business “Anytown Doodads and Supply.” That would be considered a fictitious name, and his license would say “John Smith, DBA (Doing Business As) “Anytown Doodads and Supply.” This also enables Mr. Smith to open a separate business account at the banking institution of his choice.
The advantages of a Sole Proprietorship:
You have the greatest control over business decisions, since typically you have nobody else to answer to.
A Sole Proprietorship is easily formed and dissolved, requiring little in the way of legal formalities.
Accounting is much simpler. Tax forms are usually only 1-2 pages long, and recent changes in tax laws allow Sole Proprietors to file annually instead of quarterly.2
A Sole Proprietorship is subject to very little in the way of government regulations.
Company profits go directly to the business owner.
Disadvantages of a Sole Proprietorship:
Raising capital is more difficult, since you cannot sell shares of the company, and a Sole Proprietorship has a smaller degree of perceived “legitimacy” than a corporation or an LLC.
It is more difficult to secure bank financing.
Hiring of employees can be more of a problem.
You can be subject to both the Federal Tax Rate and a “self-employment tax,” effectively being subject to double taxation.
The “biggie:” UNLIMITED LIABILITY. This means that if your business is sued, your own personal assets are at risk.
Sole proprietors can experience a major benefit by joining Association 105. This is available through the Benefits Administration for the Self-Employed, or B.A.S.E. (http://www.association105.com). Not only does this organization provide several helpful resources, it can make 100% of your medical expenses (insured and out-of-pocket) tax-deductible (normally, you would only be able to deduct amounts in excess of $6500 as of 2006). These and other benefits are available to other types of business entities as well visit the B.A.S.E. website for more information.
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