Here are some key benefits of sole proprietorships.
Easy to Start
Unlike format business structures like corporations, which require extensive paperwork and legal filing, sole proprietorships are extremely easy to start. You don’t even need to file an application with the state to start a sole proprietorship.
So, if you’re wondering how to start a sole proprietorship, here’s the gist—you can simply start running your business under your name and you’ll be a sole proprietor. No registration or legal documents are required to start a sole proprietorship.
Complete Control
When you start a sole proprietorship, you have complete control over your business. No one can tell you how to run your business and there are no formal guidelines you need to follow. You are the key decision-maker and can run it how you like.
This is not the case with a corporation, which has strict management and operational guidelines. Even with less formal structures, such as a partnership, S-corp, or an LLC, you still need to consider other co-owners and listen to their opinions.
Easy Tax Filing
One of the key reasons people start a sole proprietorship is that they don’t need to pay corporate taxes. Sole proprietors don’t need to pay any business taxes, which results in significant tax savings, this can save money if you’re on a low budget.
As a sole proprietor, you only need to file personal income tax returns. Whatever profits your sole proprietorship makes, will pass directly to you as the sole owner. You can report it in your personal tax return, along with any other income.
Full Profit Retention
When you start a sole proprietorship, you are the only owner of the business. As such, you get complete ownership of any profit your business makes. You don’t need to share the profits with anyone, as there are no co-owners for your business.
This is unlike any other business structure, be it a partnership, limited liability company, S-corp, or C-corp. All other business structures, except a single-member LLC, have multiple owners or shareholders. So, the profit is divided among the co-owners.
Extremely Affordable
Forming and scaling your business is inexpensive if you choose a sole proprietorship over an LLC, S-corp, or any other business structure. First, you don’t need to pay any business registration or state filing fees for a sole proprietorship.
Second, there are no annual filing requirements, so the ongoing costs of running the business are also low. If you don’t plan to hire employees, you don’t need to open an office and pay for rent, office supplies, or administrative costs.
Complete Privacy
When you form an LLC, corporation, partnership, or S-corp, you need to register your business with the state and provide your private information for the same. This means your personal information will no longer be private.
When you start a sole proprietorship, you don’t need to register it with the Secretary of State or provide your personal information. This allows you to maintain privacy and keep your personal information private, even while running a business.