What Is Needed for a Sole Proprietorship?

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Summary of Sole Proprietorship

A sole proprietorship is a business owned and operated by one person who is responsible for all profits, debts, and losses. This type of business structure is popular among independent contractors and small business owners due to its simplicity and low cost.

Steps to Start a Sole Proprietorship

  1. Register your business name
  2. Apply for licenses and permits
  3. Obtain an EIN if needed
  4. Open a business bank account
  5. Track your finances

Important Considerations for Sole Proprietorship

  • Advantages:

    • Easy to establish
    • Complete control over the business

  • Disadvantages:

    • Unlimited personal liability

Taxation and Legal Responsibilities

  • Report business income and expenses on Schedule C of personal income tax return
  • Sole proprietorships do not protect personal assets from financial obligations or legal action

Establishing a Sole Proprietorship

  1. Choose a business name
  2. Register a DBA
  3. Obtain necessary licenses
  4. Open a business bank account

Ownership and Control

  • A sole proprietorship is managed and controlled by a single individual
  • The proprietor and the business are considered the same entity by the IRS

Required Documentation for Sole Proprietorship

  • Copy of PAN card of the proprietor

Comparison with Other Business Entities

  • Unlike corporations or LLCs, a sole proprietorship does not require state filing
  • Personal assets are at risk if sued as a sole proprietor

Transition to Other Business Structures

  • Sole proprietors may opt to become LLCs or corporations for liability protection and tax advantages
  • Expatriates in Singapore face limitations when starting a business as a sole proprietor

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