The advantages and disadvantages of each type of formation are discussed below. Income tax returns combine business income and personal income. Little or no expense in forming or dissolving the business. Simplicity of operation. Certain reporting requirements are not necessary.
Income is taxed only once.
Social Security is the lowest allowed by law. Unlimited liability for business debts. Income tax rate may be higher than the corporate form of business organization. Tax saving or retirement plans for sole proprietors are available only through IRA or Keogh plan investments. If the business is to operate as a sole proprietorship or partnership, the entrepreneur should consider recording a declaration of business name at the local Register of Deeds office.