An incorporated entity is a separate legal entity that has been incorporated through a legislative or registration process established through legislation.
A man starting his own consulting firm as a sole proprietor would require very little capital to set up a home office to operate until sufficient funds are earned to open a larger office.
Advantages of Sole Proprietorship
The sole proprietor form of business ownership is the most common form in the United States and also the simplest. In this form of business ownership, an individual proprietor owns the business, manages the business, and is responsible for all of the business' transactions and financial liabilities. This means that any debts incurred must be paid by the owner. This form of business has several advantages .
As a sole proprietor, filing your taxes is generally easier than a corporation. Simply file an individual income tax return (IRS Form 1040), including your business losses and profits. Your individual and business income are considered the same and self-employed tax implications will apply.
Lower Start-up Costs
Limited capital is a reality for many start-ups and small businesses. The costs of setting up and operating a corporation involves higher set-up fees and special forms. It's also not uncommon for a lawyer to be involved in forming a corporation.
Handling money for the business is easier than other legal business structures. No payroll set-up is required to pay yourself. To make it even easier, set up a separate bank account to keep your business funds separate and avoid co-mingling personal and business activities.
Sole proprietorships also have the least government rules and regulations affecting it. They do need to comply with licensing requirements within the states in which they do business and they do need to pay attention to local regulations. However, the paperwork required is much less than large corporations. Thus, they can operate quite easily. Sole proprietorships also do not pay corporate taxes.
Sale and Inheritance
The sole proprietor can own the business for as long as he or she decides, and can cash in and sell the business when they decide to get out. The sole proprietor can even pass the business down to their heir, a common practice.