Hey everyone.. Lately I've been pondering whether or not I should move into being a registered sole proprietorship. Currently, I am freelancing under my own name (no fake business name or cheesy front) and have been thinking that it may be better to go down that router to reap the benefits of say, tax write offs. Anyone out there with one that could shed some light on the benefits and possibly what's involved with starting/holding a registered one? Regards, Jeff
There are no additional tax benefits of having a sole proprietorship as opposed to operating under your own name. If you are a sole proprietor you are still registered as an individual, so anything you can write off now, you can write off then. The sole benefit of a sole proprietorship is being able to conduct business under a business name, register bank accounts under the business name, etc. It's just a new name. But it can be helpful to separate business from personal expenses. I'm writing based out of my experience here in the USA (CA), so where you are it might be different.
I am not sure if you are aware, but you are already a sole proprietorship. That is what it means to just be freelancing under your own name. If you just want to add a business name, you just need to file a DBA or Fictitious Name Statement in your county. Aside from keeping your sole proprietorship, which already has all the benefits of being able to write off expenses, you obviously could form some type of business entity like an LLC or Corporation. I am not sure where you live, but I am speaking only for laws in California.
Ah, so I guess the last source I got some information from misguided me on that one. Thanks for the info guys, certainly going to look into that further. Regards, Jeff
You might find some useful descriptions of the business types here: http://www.sos.ca.gov/business/filings.htm
Yes I agree-- the benefits of a sole proprietorship mostly entail creating business bank accounts and using a name other than your own. Q...
Another possibility to consider... an LLC (aka limited liability company) is very easy to setup in many states. By default, a one owner (or single member) LLC is treated as a sole proprietorship for tax purposes. So in same cases, you can create a separate entity, look a little more professional, etc., and still have the simplicity of the sole proprietorship option...
Agree with Seattle. An LLC is the best of both sole proprietorship and corp. An LLC's income is just added on top of your's (no corp double taxation) WITH the added benefit of possible asset protection (only your LLC can be sued...not you). Something to consider anyway
In California there is a minimum $800 in taxes you will pay for having an LLC each year. I have 2 LLC's I set up for my web and other business ventures, so for me that is the best option as well.
Another benefit to using a business name as opposed to your own name, is that you can brand the business, and possibly sell it in the future. That is what I did with my tax business. If I had been doing business under my own name it would have been much harder to sell. I am also in California where you have to pay $800 minimum for an LLC or a Corp, and don't see the point if you are just starting out or if your business is small. You can buy insurance for liability protection for less money.