Some entrepreneurs run their business as a sole proprietorship. This type of business structure works best if the owner is also the operator and only employee. Essentially, a sole proprietorship means the owner and the business are interchangeable. Instead of filing separate corporate taxes, a sole proprietor reports the business income through a personal income tax return. Learn more about this structure by looking at this application for sole proprietorship. Here are some things to know about the sole proprietorship tax rate.
Sole proprietors report their business income on their tax forms each year. Since they are not employed by a separate entity, they must also pay all of their employment taxes and social security withholding’s themselves. Sole proprietor income tax, which is about 15.3%, can be more than someone who is simply an employee with a separate company. A sole proprietor doesn’t get the benefit of having an employer pay some of these taxes and therefore may not save as much on the yearly tax bill. Even though a sole proprietor is not an LLC or corporation, it is essential to have an EIN. Check out this online EIN application for more details.
Filing Taxes Each Year
Filing taxes as a sole proprietor can be tricky if you don’t know the procedure. Profits and losses must be accurately listed, and it’s essential to keep solid records each year of all business expenses to save some money on tax responsibilities. Some business owners prefer the simplicity of being a sole proprietor if they don’t expect their business to expand anytime soon. However, if you plan to grow and hire employees, you may want to consider a different business structure.
GovDocFiling can guide you through the steps to help determine what kind of business structure would be most beneficial for your company’s situation. Follow this simple survey and get a custom recommendation about which structure would be best for your business’ future and financial goals.