Do you like having your own business where it is just you and no one else? Do you prefer it because of its convenience and flexibility? If so, a sole proprietorship may be the best entity option for you. However some disadvantages flow from a sole proprietorship if it's not set up properly and you are not adequately prepared. Sole proprietorships are the most preferred business structures for small business owners, but approximately half will fail within the first year of operation.
At The Law Offices of Aaron Resnick, P.A., our business lawyer will help you identify the best business entity for your business and then move forward with formation, 规划, and strategizing so that you are well-prepared for the future success of your business. 请致电 305-672-7495 to schedule a Free 电话 Consultation and you get your business off on the right foot.
What is a Sole Proprietorship?
独资企业, 或者是个体商人, is a business owned and operated by one person who receives all of the business's profits while being personally liable for all of the business's debts and 负债.
独资企业 is the simplest and quickest way to start a business. There's no formation paperwork to file, although you may need to apply for state or industry-specific business licenses or permits or to file a trading name if different from your own.
The tradeoff for this simplicity is that sole proprietors assume all risks associated with the business. Personal assets can be used to cover the business's debts and 负债.
Sole proprietorships are the most common business structure in the United States. Due to their simplicity, sole proprietorships are ideal for low-risk businesses making comparatively lower profits.
Common Businesses as 独资企业 in Florida
Businesses that often operate as sole proprietorships include:
- 自由职业者, e.g., 作家, 摄影师, 虚拟助手, 职业顾问, 私人教练, 网页设计师
- Businesses that start as a side hustle, e.g.Etsy网店
- 咨询顾问
- 承包商
Before deciding whether a sole proprietorship is the best structure for your business, it's important to consider the pros and cons.
Advantages of a Sole Proprietorship in Florida
There are many advantages that flow from a sole proprietorship, and that's in part why they are so popular.
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低安装成本. The paperwork to start trading as a sole proprietor is limited, meaning there are minimal costs involved. 在某些情况下, you will only need to apply for relevant licenses or permits and register your business name. The setup costs will reflect the fees associated with licensing and registration.
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易于运行. When it comes to sole proprietorships, there is much less government regulation compared to other business structures. 不像公司, 例如, sole proprietorships don't require a board of directors or annual meetings. You also do not have employees, so you manage only yourself and no one else unless you enter into a contract with a third party.
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简单的税收. Sole proprietorships are pass-through entities. There is no legal distinction between the owner of the sole proprietorship and the business. The owner simply reports the income from the business on their personal tax return, which is then taxed at the personal rate.
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Full ownership and control. The owner of a sole proprietorship makes all the decisions about the business, without needing to consult other owners or members or answer to shareholders. They have complete control over the business.
当然, these advantages only benefit your business if they are aligned with your business goals and mission. When your business starts to grow, you may need to rethink the business structure.
Disadvantages of a Sole Proprietorship in Florida
Understanding the disadvantages of a sole proprietorship will help you proactively strategize and plan your business.
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Unlimited personal liability. As the owner and business are treated as one, an owner of a sole proprietorship is personally liable for the debts, 负债, and obligations of the business including loans and lawsuits. This means their personal assets can be seized to pay any 负债.
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Full ownership and control. While the owner of a sole proprietorship has full control over the business and can freely make business decisions, the success and failure of the business also rests entirely on them. This can be stressful and create a heavy workload.
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Limited funding options. Attracting outside investment in a sole proprietorship is difficult. Due to the unlimited liability of the owner, there's no protection against creditors. 投资者和银行, 因此, often view sole proprietorships at a greater risk of business failure than other structures.
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税收. While the profits of a sole proprietorship are passed to the owner and taxed at the personal rate, the owner has to pay both income tax and self-employment tax, 这些加起来.
When deciding on your business structure, you should weigh these factors in light of your circumstances.
When Should You Incorporate a Sole Proprietorship or Form an LLC in Florida?
Sole proprietorships commonly transition to a limited liability company (LLC) or incorporate as they grow.
While a sole proprietorship is a great starting point for your small business, once it begins conducting higher-risk business activities, incorporating or forming an LLC limits your liability.
In addition to reducing risk, corporations and LLCs are more heavily regulated business structures, making them a more attractive investment choice for investors. You might consider forming an LLC or incorporating when you want to seek capital investment to expand your business.
Changing your business structure like this as your profits increase may also unlock potential tax advantages.
If you're considering incorporating your sole proprietorship or forming an LLC, you should speak to a business lawyer in Florida for advice based on your specific circumstances and your goals for your business.
Contact a Business Lawyer in 迈阿密-Dade Today
Sole proprietorships are a great starting point for many businesses. To make sure you start yours with success in mind and have a plan for future growth in place, consult with a business law attorney in 迈阿密-Dade. At The Law Offices of Aaron Resnick, P.A, our business lawyer will help you identify the right business structure and help you form and grow your business. Contact us today either by filling out the online form or contacting us at 305-672-7495 to schedule a Free 电话 Consultation today.