In simple terms, a sole proprietorship refers to a business which is not incorporated and which has only one owner.
The general rule with home office deductions is that the deduction cannot generate a business loss. But there’s an exception to this rule.
When a sole proprietor has an employer identification number (EIN), it would seem to be common sense that the proprietor would put that EIN on the Schedule C for the proprietorship. Not so fast — especially of the sole proprietorship is a single-member LLC taxed as a sole proprietorship.
I’m encountering more and more sole proprietors who want to form S-corps so they can save on taxes. It’s a good strategy — if you know what you’re getting into. The problem I encounter with these clients is: almost all of them engage in mystical thinking about the wonders of S-corps.
This series on choosing a business entity started last June and covered 10 parts. Here’s a listing, with links, of all the parts in this series.
There’s no magical checklist for deciding on a business entity. But here are a few considerations.
In tax terminology, the term “draw” refers to money taken out of a sole proprietorship by the proprietor, or out of a partnership by a partner.
Does a Sole Proprietorship Need a Balance Sheet?
A discussion of the sole proprietor business entity.
Some basic tax information about sole proprietorships