Being a sole proprietor has its tax advantages. Find out how you can benefit.
A sole proprietor business structure is the most simple type of business one can establish. By being a sole proprietor, it means that you and only you own your company and that you are also personally responsible for its assets and liabilities — ‘personally’ meaning you can be sued for personal assets due to a business incident. However, there are great advantages to being a Sole Proprietor and it makes the most sense for many businesses.
You have direct discretion on expenses and revenue. As a result, you have more leeway with your tax situation by being strategic with income and expenses.
Your tax preparation is easier. This is because you can continue to file form 1040 and attach a Schedule C. S & C Corporations have more complex tax filings.
You can hire your family. You can continue to be considered a Sole Proprietor and have your spouse as an employee of the business as long as they’re truly an employee. Also you can hire your kids without having to pay into Social Security and Medicare. This typically saves you up to almost 8% versus having an employee that is not in your immediate family. Also, if you’re not paying them more than $6200 in a given tax year, they do not have to file federal taxes.
Let us help you determine the best business structure for your specific tax situation.