What are the advantages or disadvantages of Sole Proprietorship for new company set up?
Sole proprietors pay tax on their business income on their personal income tax return. The IRS calls it “pass-through” tax as business profits pass through the business and are taxed on the personal income tax return. Sole proprietors must report all business income and expenses on Schedule C, E or F which is attached to Form 1040. The tax is paid on net income after deducting all operating costs, advertising and travel expenses. Certain start up costs can also be deducted. The sole proprietor may also be liable for self-employment tax and/or estimated tax payments through out the year depending on the net business profits.
