A Sole Proprietor Business

A Sole Proprietor Business
The sole proprietorship
The sole proprietorship is a form of business structure that is commonly used in small companies. It is taken to be the same as the owner; this makes the business structure to be advantageous due to its simplicity and at the same time disadvantageous due to its personal liability. A sole proprietor business comes into being when one individual chooses to start a company. In the United States, this kind of business structure exists as the easiest and commonly encountered the type of business. Functioning as a sole proprietor has a substantial tax and legal effect on the business and its owner.
Creation of Donna’s Boutique
As earlier mentioned, this type of business structure is the simplest way of doing business. Formation costs for Donna boutique are very affordable, and a lot of formalities are not involved in its formation and running. Additionally, no formal action will be needed to create this business. However, just like all other business, this business will have to get the necessary permits and licenses.
The business will also adhere to state set regulations since they tend to vary from one state to another, and lastly in different localities. Whenever the business name is not the same as the name of the business proprietor, the company must get a registration from the state; therefore, this boutique will be registered with my name to avoid these conflicts.
Liability in Donna’s Boutique Business
Lack of liability protection in a sole proprietorship is a major drawback of operating as a sole proprietor where my business falls.

However, the boutique can still insure against various risks and function in comfort just like corporation owners; this will be achieved due to predetermined limitations for contract risks as well as insurance for tort risk. The government will view the owner of Donna boutique as the same legal identity with the business.
Besides, the owner will have unlimited liability for occurrences that take place while the business is in operation. When Donna Boutique faces lawsuits and has insufficient assets to cover a ruling, the owner may risk losing their personal assets such as their homes, automobiles, and lands. This is because creditors of sole proprietors may decide to go for the personal assets as reparation for business obligations and debts.
Taxation of Donna’s Boutique
It is not required for the sole proprietors to file a business tax return regarding their companies’ profits and losses. In fact, this business will be guaranteed to pass its profit and losses portion directly to owner’s individual income tax return. This is opposite to a business structure such as corporations that demands to file of a corporate tax return. Conversely, Donna boutique will have to fulfill self-employment taxes on income that the business brings in. The boutique will also not be able to deduct fringe reimbursements such as the cost of availing life and death insurance benefits to workers.
Since sole proprietors have no employer that will be withholding income taxes from their pay check, it will be the task of the boutique’s owner to set aside enough funds for paying taxes on any business income they make during the year. This will be done by estimating the tax amount their boutique business will owe yearly and making quarterly estimated income tax submissions to the IRS. Also, the boutique owner will be required to contribute to the Medicare and social security systems; coupled together, these contributions are known as “self-employment taxes”. Sole proprietors have to make their contributions during the time they make their other income taxes; it is contrary to the way regular workers contribute to these programs by deductions from their pay checks.
Control of Sole Proprietorship Business
A sole proprietor has a total mandate to control each aspect of his business. Decisions in Donna’s Boutique will solely be done by the owner of the business and it is not a must for them to consult with other people to arrive at the required decision. This process of making a decision by the business owner will permit the owner of Donna’s Boutique to respond swiftly to changes in the market. However, things can as well backfire in case the boutique owner has no expertise in this field, for instance, marketing and accounting.
Since decision making is solely done by the owner, the owner of this boutique will be making a decision of allocating company resources in whichever way they want, simply because no law demands that business income and personal income should be separable. In essence, it suggests that Donna’s Boutique owner can still utilize company funds in meeting their personal obligations.
Continuity of Donna’s Boutique Business
Because this business will be run by one individual, it will always lack continuity. For that matter, it means the company will automatically shut down whenever the boutique owner dies, chooses to sell this business or retires. As such, it will become challenging for the boutique business to attract investors due to the business lacking continuity. Nevertheless, the owner of this business may face difficulties in securing business loans because lending institutions fear that they may become disabled or worse still, become disabled.