Starting a Business as a Sole Proprietor!
A sole proprietor is personally liable for the debts of the business. Personal liability is a huge factor when there are substantial assets, lots of debt, and several employees.
Because the sole proprietor’s business profits and losses go directly to the individual’s income tax return, this type of business structure is considered a flow-through entity for tax purposes. One of the benefits of a sole proprietorshipis direct taxation. This is a great advantage during the early years when losses tend to be more common. Any losses in the business can be deducted from personal or other income as long it’s not the owner`s hobby.
If the business is incorporated, any losses incurred by the corporation must be applied against the corporation’s income and cannot be used to offset personal income.If you cannot utilize the losses in the year they occur, they can be carried back for three years and forward for 20 years to offset past or future income.