Legal Obligation To Pay Debts Quizlet

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The main disadvantages to being a sole proprietorship are Unlimited liability Your small business in the form of a sole proprietorship is personally liable for all debts and actions of the company Unlike a corporation or an LLC your business doesn't exist as a separate legal entity.

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To cover your federal taxes saving 30 of your business income is a solid rule of thumb According to John Hewitt founder of Liberty Tax Service the total amount you should set aside to cover both federal and state taxes should be 30-40 of what you earn.

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One of the advantages of a sole proprietorship is its simplicity You do not separate taxes for your business you simply report all of your business income and losses on your personal income tax return But with that simplicity comes personal liability for legal judgments taxes and debt.

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