Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
Advantages and Disadvantages of a Sole Proprietorship
Easy to Start
Before starting operations of your sole proprietorship, you need to check with your local and state government to find out what lecensing you may be required, such a sales tax certficate if you intend to sell retail items. You may also have to register a fictious name (a "dba", doing business as) with your secretary of state of the county. In contrast, to set up a corporation, there are certain state mandated procedures that be complied with, such as filing Articles of Incorporation and publishing the articles in a newspaper.
Control and Flexibility
As the sole owner of your business, you're the boss! You have complete control and the flexibility to make decisions and act on them quickly; there's no one to vote you down or slow you down.
Business Losses are Deductible on Your Personal Income Tax Return
As a sole proprietor you can deduct a business loss from your other income such as, a spouse's wages, interest and dividend income.
Convert Nondeductible Personal Expenses to Tax Deductions
Owning your own business lets you convert nondeductible personal expenses to deductible business expenses.
For example:
Car loan interest: If you use your car for business purposes, you may deduct car loan interest related to the business use of the vehicle. For example, if your car loan interest is $1,500 and you use your car 80% for business purposes, you can deduct $1,200 (80% x $1,500). The remaining $300 is considered a nondeductible personal expense. To claim the interest deduction, you add the business-related portion of the interest to your mileage allowance. If you use the actual expenses method, you add the interest to your total actual expenses.
Home office deduction: If you use a portion of your residence (owned or rented) regularly and exclusively for business purposes, you may deduct certain household expenses based on the portion of space allocated to your business use.
For example, if the space used for business represents 20% of the total square feet of your residence, you can deduct 20% of the cost of such indirect expenses as, homeowner's insurance, water, electric, garbage disposal, homeowner association fees, depreciation (if you own your home, not if you rent) and any direct expenses, such as painting your office.
No Double Taxation
Since a sole proprietorship and its owner are not separate entities, only the owner is subject to taxes on business net income; their is no separate entity to tax. In contrast, income of a corporation is subject to double-taxation, first at the corporate level, then again at the shareholder level on dividend distributions.
Disadvantages of a Sole Proprietorship
Personal Liability
The biggest downside of a sole proprietorship is the owner's personal liability for business-related debts. For example, if you go out of business and still have some unpaid business debts, your business creditors can go after your personal assets to get paid. If someone gets injured on your business premises and sues, unless you have sufficient liability insurance, your business and personal assets are all up for grabs.
Hard to Raise Capital
Your ability to raise additional capital may be limited. For example, once you tap the funds of family and friends, other people may not be willing to risk their money on your venture. You'll have to find some other lending source, such as a bank loan. Trouble is, conservative lending institutions, like banks, view business loans to self-employed small business owners as high risk. They prefer to make safer loans, such as home equity loans where they have sufficient collateral.
No Continuity of Life
When a sole proprietor dies or sells the business, the business ceases to exist. In contrast, when a stockholder of a corporation dies or sells his stock, the business continues to exist and operate.