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Business Entity: Massachusetts Sole Proprietorship Lawyer

A sole proprietorship can be defined as any unincorporated business with a Massachusetts sole proprietorship lawyer - Alan Segal in front of a buildingsingle owner. It’s the most commonly used form for new small businesses. If your business has only one owner, the IRS will presume that it’s a sole proprietorship unless you incorporate under state law.

If you or someone you know is interested in starting a sole proprietorship, contact our Massachusetts sole proprietorship lawyer today!

From the IRS’s perspective, the business is not a taxable entity. Instead, all of the business’s assets and liabilities are treated as belonging directly to the business owner. When tax time rolls around, all income and expenses generated by the business are reflected on either Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business. Whichever of these forms you use, it must be included as part of your annual individual tax return (Form 1040).

How Does Form 1040 Work?

To give you a handle on how this form works, your gross revenue from sales and other business income items are reported on the top of the Schedule C or C-EZ. Expenses of the business are subtracted from income to arrive at the net profit (or loss) figure at the bottom of the form.

The net profit or loss is then carried over from the Schedule C or C-EZ and reported on page one of the owner’s 1040. This means that there is no separate tax rate schedule that applies to a sole proprietorship – the business owner’s individual tax rate will determine the amount of tax paid on the earnings of the sole proprietorship.

The main advantage of a sole proprietorship is simplicity. Because there is only one owner, the accounting rules are much easier to understand and to use. Also, a business owner may transfer money in or out of the business with no tax effects to keep track of.

If you or someone you know is interested in starting a sole proprietorship, contact our Massachusetts sole proprietorship lawyer today!

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