You can share ownership of your business with your legal spouse and still maintain it as a sole proprietorship. You can either split business profits and losses on separate returns, or put them on your joint Schedule C return. Similarly, by not classifying your spouse as a partner or an independent contractor, he or she won't have to pay self-employment taxes, and your business won't have to file a partnership tax return. Simplicity of Operation. Record keeping is streamlined and required legal documentation reduced.
Sole proprietorships are inexpensive to start-up and maintain.
No Double Taxation. Because the business is not treated as a separate taxable entity, all business income is reported on the owner's individual tax return and is therefore only taxed once. Finally, if you have a business loss, you may be able to use it to offset income that you receive from other sources. Available tax sheltered retirement programs, such as Keogh plans, can allow a sole proprietor to salt away a substantial amount of income free of current taxes. You can't really do any better by setting up a corporation.