A sole proprietorship, commonly known Doing Business As (DBA) is foremost the simplest form of a business entity that a business owner can choose from. Sole proprietorships are commonly none as your ma and pa type businesses. In this type of entity provide no personal liability protection against and claims, lawsuits or creditors. DBAs are filed within the county in which you live and/or operate your business. The income and losses from the business is reported on the owner’s federal tax return via Schedule C.
In this entity the liability of a sole proprietorship rest solely on the owner. The owner of the sole proprietorship can carry liability insurance but even with such coverage the owner’s personal assets are still at risk in the event of a lawsuit since this type of entity does not afford any type of personal liability protection under the law.
A sole proprietorship is taxed at its owner’s tax rate. The business profit and expenses are reported on Schedule C of the owner’s federal income tax return. The business owner has the option to use their Social Security Number or Federal Tax ID Number (FEIN) which is obtained from the IRS when papering and filing annual tax returns.
Longevity or Continuity of the Organization
The duration of a sole proprietorship is perpetual. A sole proprietorship can cease to exist at any time at the discretion of the owner or upon owner’s death. Upon the death or disassociation of the owner the owner of a sole proprietorship the business will not be able to continue as a sole proprietorship. The business will have to either shut completely, be transferred to another individual or entity pursuant as stated in a will or have the assets sold off.
The owner has complete control of the entire operation and decision making. There are no board of directors or stock holders that manage, control or influence the decision making process.