Operating as a Sole Proprietor you own your business assets and personally operate your business. You are treated as one with the business for tax purposes. A sole proprietor is personally liable for the contracts and activities of the business. Your personal and your business assets are exposed to all personal and business liabilities. If you are married, you and all personal and business assets are responsible for all claims arising upon dissolution of your marriage.
Proprietorship Formalities
You do not have to observe any formalities other than license, if any, imposed by governmental entities, and registration
for the use of a fictitious name. There are no reporting requirements except for tax returns.
Sole Proprietor Ownership – Operating as a Sole Proprietor
Ownership is not separated from control. You have no limitation from liability for both contracts and your actions. The result of all of this is that if you transfer all or a portion of your business the buyer will inherit your liabilities. This will raise concerns as to the continued operation of the business by the buyer.
Selling your proprietorship business
Often the buyer will want to continue the business in the same location and under the same name. Therefore, the concern for all of this liability will be reflected in the price and in the advisability of purchasing the business. If you sell this form of business the buyer will get business assets that are subject to the claims of your spouse or a former spouse for equitable distribution the sale of This is particularly true where the business is continued in the same name at the same location and where the name of the business includes the name of the proprietor. The business assets sold may be subject to the claims of a spouse or former spouse upon a claim for equitable distribution of marital property which may survive the dissolution of a marriage
Financing your proprietorship business
If you finance this form of business, you will have to use all of the your personal as well as your business assets. This includes your home, your hunting cabin, your Harley and your condo if the business fails you loose all of these assets Taxation of your business All profits are taxed whether they are held for use in the business or used for its operations. Bringing another person into your business If you bring another person into the business the business becomes a partnership. This occurs even if no formal partnership agreement is ever spoken or written. All of the consequences of partnership then apply. This applies whether the person is a member of the family or a complete stranger
For all of these reasons, Operating as a Sole Proprietor frequently a business is started as a sole proprietorship, and later morphs into another form If you are operating a business, the assistance of a skilled professional can help you protect what you have while maximizing your success.
Call me at 570-826-0481 or at 800-221-0618 (in Pennsylvania only) I can help!