Question by  SamZ (27)

What are the tax advantages of a sole proprietorship?


Answer by  zippythepinhead (46)

The advantage of operating a business as a sole proprietorship rather than a corporation is you avoid double taxation. Corporate profits are taxed at the corporate level. The owner also pays personal taxes as well when he cashes in on his investment in the form of dividends or capital gains.


Answer by  shanna34 (34)

A sole proprietorship's income is not subject to a business income tax, but is instead reported and taxed on the owners personal income tax return.


Answer by  tamarawilhite (17883)

If you have low income from the business, the sole proprietorship pays low income taxes as well, such as at the 10% personal income tax rate.


Answer by  mtown934 (733)

A sole proprietorship has a lot less taxes to pay, especially in comparison to a corporation. Corporations are double taxed and as the owner of a sole proprietorship you won't need to worry about this. Also, with less profits you'll have less to pay on those profits.


Answer by  John (9008)

It allows you to avoid being double-taxed (paying taxes on the business and on personal income). There are severe disadvantages to sole proprietorships in other areas, however.


Answer by  AnkurMohta (114)

The tax benefits available in sole proprietorship are:- The business income is treated as your personal income. You can deduct your business losses to the extent of your total income.

Reply by elsewhen (627):
S-corps can be slightly better than a sole proprietorship if you are making a reasonable amount of money. you pay yourself a salary and pay regular taxes on that. Any additional profit goes to you as dividends and you dont have to pay medicare tax (3%) on that component.  add a comment

Answer by  jennyv8 (133)

Sole proprietors do not have to pay corporate income taxes. Sole proprietors can also deduct business losses from their total income from all sources.


Answer by  anthony (45)

Sole proprietorship's tax advantage is that the profit or losses can be recorded on a 1040 after completing Schedule C and they donot have to pay corporate taxes.

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