1. Definition and Scope A sole proprietorship is a business structure owned and operated by one individual A self-employed individual is a person who works for themselves and earns income independently Sole proprietorship refers to the legal form of the business,...

1. Maintain Separate Business and Personal Finances Open a dedicated current bank account for business transactions Avoid mixing personal and business expenses to ensure clear financial tracking Use a separate credit or debit card exclusively for business purchases...

1. Unlimited Personal Liability The owner is personally responsible for all business debts and obligations Creditors can claim the owner's personal assets, such as property or savings, if the business cannot pay There is no legal separation between the business and...

1. Simplicity of Formation and Operation The easiest and fastest business structure to start with minimal formalities No requirement to register with the Ministry of Corporate Affairs (MCA) Does not involve complex legal documentation or incorporation fees Day-to-day...

1. Determine Total Business Revenue Add up all income received from selling goods or providing services Include all forms of payment (cash, checks, online payments) related to the business Do not include any personal income or...

1. Form 1040 – U.S. Individual Income Tax Return This is the main form used by sole proprietors to file their personal income tax It includes all sources of income, including profits from the sole proprietorship The form consolidates income, deductions, and credits to...

1. Business Identity and Registration The IRS assigns an Employer Identification Number (EIN) if requested by the sole proprietor An EIN is used when hiring employees or opening a business bank account Sole proprietors may use their Social Security Number if they do...

1. Taxed as Individual Income A sole proprietorship does not have a separate tax identity The business income is treated as the owner’s personal income The proprietor files their tax return using the individual ITR form (usually ITR-3 or ITR-4 under presumptive...

1. Not a Separate Legal Entity A sole proprietorship does not have a separate legal identity from its owner It is considered an extension of the individual, not an independent business unit Only registered companies and entities with distinct legal status can become...

1. Not a Legal Requirement There is no mandate under Indian law to prepare or submit a business plan to start a sole proprietorship Registration, licensing, and bank account setup do not require a formal business plan The business can begin operations based on the...