Besides unlimited legal liability, are there other disadvantages to the sole proprietorship as a form of conducting business?
Two other inherent disadvantages of the sole proprietorship are– * the inability to split income among family members with respect to the business’ unearned income (for the benefit of children age 14 or over) as discussed in Question 3. However, a child employed by a parent’s proprietorship does generate FICA and FUTA savings if under age 18. * the unavailability of certain estate planning techniques such as valuation freezing (as a result of transfers of a portion of the ownership) because of indivisibility of the ownership of a proprietorship. 3. What are the tax benefits in using “pass-through” entities? Pass-through entities such as S corporations and partnerships provide the following planning opportunities: * Family income splitting of the business’ earnings for income tax purposes can be accomplished provided that the entity’s income is derived mainly from the fruits of capital as opposed to labor (e.g. a personal service enterprise). * Estate splitting of the business’ value a
