Examining the Advantages and Disadvantages of a Sole Proprietorship

Illinois small business attorneysIn a sole proprietorship, an individual proprietor (the owner), manages and runs their business. They receive all income for the company, but they are also responsible for its debts, liabilities, and tax obligations. Learn more about this widely used business structure, including its advantages and disadvantages, and how an attorney can assist with the setup.

Advantages of a Sole Proprietorship

Of all the business structures that one can choose, sole proprietorships tend to be the most affordable and easiest to start. Paperwork and other legal items are generally less extensive, and the sole proprietor is only required to comply with state and federal tax laws, zoning laws, and other local regulations, such as licensing laws.

There are also few formal business requirements (except those specific to the industry they operate in), and because the owner has full control over the decision-making power within their business, they may sell or transfer it to another owner or entity at any time they deem necessary. The owner may also change the structure of the business at any time, but it is important to recognize that obligations before the switch may still fall on the owner of the company.

Disadvantages of a Sole Proprietorship

Unlike other business structures, sole proprietorships are not protected from liabilities and bad debts incurred by their company. Instead, they may be held personally liable. In extreme situations, this can cause the business and the owner to simultaneously go bankrupt. Furthermore, the sole proprietor is required to pay all federal taxes on any income earned, and they may be penalized if they do not meet their obligation.

Another major disadvantage is that few investors are willing to put money or energy into a sole proprietorship; quite simply, there just is not enough protection for the investor. As such, sole proprietor business owners typically rely on personal loans and assets to finance the company. If the business fails, this can result in a serious financial loss for the owner of a sole proprietorship.

Contact Our DuPage County Business Law Attorneys

Although sole proprietorships are relatively simple and straightforward in terms of setup, there are some obstacles that business owners should be aware of before moving forward. Stock, Carlson, Oldfield & McGrath, LLC can help ensure that these matters are understood by business owners and that they receive personalized attention to fit their needs. Learn more about how we can assist with your business set-up by scheduling a personalized consultation with our DuPage County business law attorneys. Call our offices at 630-665-2500 today.

Source:

http://www.nytimes.com/allbusiness/AB4113314_primary.html

Steps to Dissolving a Business

Illinois business law, federal business laws, Illinois business lawyer,If you are considering dissolving your business, there are many things to be aware of before you begin the proceeding. The first is that you should speak with a business attorney to determine the bests steps to take and whether or not your business is applicable for tax breaks and what financial legal burdens you have to handle before you walk away. Also be aware that you have to file an annual tax return for the year that you go out of business, even if your business closes in the first quarter. Other financial burdens that must be resolved include the closing of all accounts and the resolution of all business debt.

These tax returns are in addition to the reports that you must file to officially dispose of your business, which must be filed no matter what type of business you operate. This is true for a corporation, S corporation, LLC, or trust. If you fail to file these dissolution papers, you could still be liable to pay taxes and filings. If you are operating as a partnership or sole proprietorship, you may not be required to fill out these dissolution papers. If you have any question as to whether or not you should file these, it should be discussed with a legal professional.

Another major step is to make sure that you have canceled all registrations, permits, licenses, and business names. This ensures that you will no longer be responsible for any additional payments and responsibilities. Most of these filings will be done at the state or local level, which is why it is important to work with a legal professional who is in your area and familiar with local laws.

The next step to closing a business it to make sure that you have complied with all employment and labor laws. The Worker Adjustment and Retraining Notification Act (WARN), for example, requires that all employers who have 100 or more employees provide at least 60 days (two month) written warning that the business will be closing.

If you or someone you know is considering closing a business, the most important step is to seek legal counsel. Contact an experienced DuPage County business attorney today. Call the Law Office of Stock, Carlson, Oldfield & McGrath LLC 630-665-2500 to schedule a consultation.

Sources:

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Closing-a-Business-Checklist

https://www.sba.gov/content/steps-closing-business