Time to Startup!

The BizFilings blog covering business tips and trends.

A Few Notes On Incorporating a Sole Proprietorship

Published on Jun 8, 2011


Read 'A Few Notes On Incorporating a Sole Proprietorship' at 'Time to Start Up,' the small business blog by BizFilings.
Most entrepreneurs start companies as sole proprietorships, which is essentially a default business entity. This filing status is a sensible option for solo professionals such as freelance photographers, graphic designers and contractors. However, as a business grows and begins to take on more employees, finances, customers and general business responsibilities, owners will need to protect themselves from the threat of legal and financial liabilities. Proprietors in a general partnership also run the threat of being liable for debts incurred from lawsuits, as such statuses are seen as indistinct from individuals under the law. Not only can incorporating a businesses with an S corporation or LLC status help protect proprietors' personal assets, it can also alleviate tax burdens, in certain circumstances. "Owners of Subchapter S Corporations, a common format for professional service businesses such as accountants, attorneys or physicians, can receive compensation in the form of dividend distributions," points out Marla Brill for Reuters Wealth. "Such distributions aren’t subject to Social Security tax, which is 10.4 percent of the first $106,800 in wages this year and 12.4 percent in 2012." For more on the advantages and disadvantages of incorporating visit the BizFilings Learning Center.