Monday, April 13, 2015

Dangers of Being a Sole Proprietor

I dedicate this blogpost to those who are authors with a publishing company, but are operating as a sole proprietor.

Now how many of you like a simple life? I'll be honest, I do too. But this is one area that you can not neglect. Let's talk about what a sole proprietor is:

This is where you own a business and you can start it right where you are. You don't have to file any article with your respective state. The only thing you have to file is a DBA (doing business as) with the state. The cost should be less than $50 depending the state. On your taxes, you can just file just file a Schedule C and call it a day. Sounds simple, right? It is.

Now, let's talk about the dangers. 
If you are sued in your business, you have no protection of your business. Whoever is suing you can come after your business assets AND your personal assets. If the business is bankrupt, so are YOU. 

People with a business as a sole proprietor will more & likely stand a greater risk of being audited by the IRS. If you don't have any income for 5 years or if you have losses, it will be treated as a hobby and not a business. If you set up your business as an LLC (a hybrid version of a sole proprietor, where creditors can not come after your personal assets) that's a way around that trap.

Just a little food for thought.

The Mayne Man

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