BENEFITS OF SOLE

SP
SOLE PROPRIETORDHIP
PROPRIETORSHIP
P R E S E N T E D B Y: M S . S A L I N G AY
 BENEFITS
OF SOLE PROPRIETORSHIP
• A sole proprietorship is the
easiest and least expensive form
of business to set up and operate.
If you operate your business under
your own name with no additions,
you don't even need to register
your business name to start
operating as a sole proprietor.
This makes the sole proprietorship
ideal for business startups, self-
employed contractors, and part-
time and home-based businesses.
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OTHER BENEFITS OF SOLE PRPRIETORSHIP

Full ownership
Simpler taxes and accounting
Deductible business losses

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As a sole proprietor, you own 100% of the business
and get to make all the decisions. Unlike corporations,
sole proprietors are not required to hold shareholder's
meetings or take votes on management issues. You
can also manage your own schedule and hours of
operation, depending on the customers' requirements.

Sole proprietorships are much simpler to operate from

a tax and accounting perspective because you do not
need to file a separate business tax return—all income
generated from the business is reported on your
personal tax form.4 The business owner receives all
profits directly.
As with other forms of business, your expenses related to
the cost of doing business are deductible from income tax.
This includes:

>Travel expenses
>Automobile expenses
>Advertising
>A portion of your home expenses if you are operating a
home-based business

Business losses can be deducted against other forms of

income, so a sole proprietorship that loses money in the
early years can deduct the losses against personal income,
making it ideal for those wishing to transition from
employee to self-employed over some time.
 DISADVANTAGES OF
SP
SOLE PROPRIETORDHIP
SOLE PROPRIETORSHIP
P R E S E N T E D B Y: M S . S A L I N G AY
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Disadvantages
of a Sole Proprietorship
Being self-employed in a sole proprietorship often means having no
employees or partners to discuss business issues, explore new
ideas, or interact with on a social basis. Other significant downsides
include:

• No legal separation
• Exposure to liability
• Business income reported as personal
income
• Difficulty getting contracts
• Hard to sell the company
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 With a sole proprietorship, there is no legal
separation between you and the business, so
if the business fails and incurs debts, your
personal assets—including your home and any
other assets registered in your name—could
be seized to discharge the liabilities (which
can be unlimited). Likewise, if you are sued
for damages caused by accident or negligence
in your business activities, your personal
assets can also be seized.

TIPS: If your business activities could expose

you to substantial liability, a sole
proprietorship is probably not suitable for
business.

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While tax simplicity can be an advantage for sole
proprietorships, it can also be a disadvantage in terms
of flexibility because all business income must be
reported as regular income in the year it was earned.
Incorporated companies have much more flexibility in
terms of how and when the owners are paid.

Some businesses and government agencies will not

deal with unincorporated businesses because they view
a sole proprietorship as not having the same level of
legitimacy and professionalism as an incorporated
business. Many also believe a sole proprietor increases
the risk of the tax authorities treating the person as an
employee rather than an independent contractor.
Sole proprietorships can also be difficult to sell
because the business is completely tied to the
owner. Since there is no distinction between the
assets of the owner and the business's assets, the
proper valuation of the business can be hard to
achieve. Operation wise, unless the sole proprietor
has friends or family members who can carry on
running the business, illness, or injury can affect
business continuity. Customer loyalty resides with
the original owner of the business and may not
readily transfer to a new owner.
Key Takeaways:
>A sole proprietorship is an unincorporated
business owned by one individual.
>The gains and losses of the sole proprietorship are
reported on the owner's personal income tax return.
>The owner of a sole proprietorship is responsible
for all debts and liabilities.
 PRESENTSTION
FR
FABRIKAM RESIDENCES
ENDED BY:
RISHA MAE
SALINGAY AND
LYNDZY
KATHERINE