Advantages of being a sole proprietor
There are a lot of individuals that enjoy the comfort of working from their own homes and setting their own hours. If you don't want to create your own company and figure out all the legal paperwork that comes along with it you can work as a sole proprietor for other companies. This is a great option for many people that would like to make some income but still have a lot of flexibility. A sole proprietor is responsible for all of their taxes as they are the only owner of their business. There are many great benefits to being a sole proprietor, here are some of them.
Easy to Start
Depending upon the type of job you will be doing, there is literally nothing to it to get started. Let's say you are a graphic designer and you will be doing some freelance design work, all you need to do is set up an office area in your home for your new business and turn to your existing computer to get started. Its very easy to get started and for most people you don't need to go through a lengthy legal paperwork process to get started. If your business starts to grow, you can consider changing to an LLC or another structure to give you more legal protection. The other nice thing about a sole proprietorship is that they are easy to dissolve.
You are in Control
While you might work for other people, you are in complete control over your business. You have all the decision power to decide upon how much work you want to do, when it will be completed, how much you will charge and so forth. Having so much control gives you the absolute power you may have been seeking for your business. You are able to control all the concerns and to seek out new clients and to truly work for yourself. The only person to argue with is yourself, which also makes it easier for you to get work done!
A lot of people like sole proprietorships because it is a single tax law. You only have to pay once, which makes it simple and you don't have to pay as much as you do if you incorporate your business. When you use a sole proprietorship method you don't need to pay taxes on income twice. You only pay once, so you aren't paying on being the owner and paying on the income generated by the business. As a sole proprietor, you are considered the same legal entity as the business so you don't need to pay only corporate taxes, just the income tax each quarter. There is no distinction between your personal income and your business income, so you can spend the money however you like. It is important that you do invest some back into your business or you will be taxed at a higher rate.
As a sole proprietor you are able to deduct a lot of business taxes. This includes things like your vehicles to the paper you buy for your business. You need to keep detailed receipts and things in order to prove that it was a legitimate business expense. The owner is able to deduct a lot of the business losses from their personal income, which also aids in reducing your tax bill. Programs like TurboTax can walk you through all of the business deductions, making it easier and much more affordable for you. Just make sure you are paying your quarterly taxes so you don't get into trouble. If you owe more than $1000 to the IRS, you will be penalized.
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