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Miguel has decided to start his own business as a sole proprietor Which advantage will he receive in choosing the option?
Wiki User
∙ 14y ago
As a proprietor his advantages are:
- He will pay taxes only on his businesses income
- The business will require very little paperwork to get started
- He will be able to deduct his business expenses from his income
As a proprietor his disadvantages are:
- He is legally liable for the actions of his business. If his business gets sued or and he is ordered to pay by the court, he will be personally responsible and this could wipe out his bank account. If the business cant pay back loans, he is personally responsible.
If he were to set up a corporation
- The corporation will pay income taxes on its income. He will receive a paycheck from the corporation and he will pay taxes on that income as well. In other words his income will be taxed twice.
- The corporation will deduct the business expenses from their income for tax purposes rather than himself
- The corporation will be legally liable if the business gets sued and is ordered to pay a settlement. The corporation would be liable if loans were not paid back, not himself (unless he co-signed the loan). This could wipe out the corporations bank account but not his own.
Wiki User
∙ 14y ago
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