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What is a sole proprietorship? (New Business Checklist)

This is the easiest and least expensive method of setting up a new business. However, you have no personal liability protection, meaning that you are personally liable for the actions of your business. In terms of taxation, a sole proprietorship offers both advantages and disadvantages as compared to other forms of organization. Income from a sole proprietorship flows through to you, the owner, and is taxed as your own personal income. This keeps taxation relatively simple. On the other hand, a sole proprietorship must pay self-employment tax on top of personal income tax. Also, unlike with other forms of business such as a corporation, certain business tax deductions may be limited.

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