A sole proprietorship is owned and run by one person. There is no legal distinction between the owner and the business. A sole trader has complete control and is responsible for all aspects of the business, including debts and liabilities.
- Sole proprietors receive all profits but also shoulder unlimited liability.
- Sole proprietorships do not require trading names.
- Sole proprietors are personally liable for all debts and losses.
- Sole proprietors have full control over decision-making and profit distribution.
Becoming a sole proprietor is uncomplicated, involving a few simple steps to launch the business and start serving clients.
- Sole proprietors need to report income and expenses using Schedule C and Form 1040.
- Sole proprietors and LLC members must report profits and losses on individual returns.
- Sole proprietors lack legal separation from their companies and face unlimited personal liability.
- LLCs provide liability protection, safeguarding personal assets from business debts.
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