What are the tax implications of a sole proprietorship?
As a sole proprietor, you report your business income and expenses on your personal tax return using Schedule C. This means your business income is taxed at your personal income tax rate.
Are there any specific deductions I can take?
Yes, you can deduct business expenses such as home office costs, supplies, and travel expenses related to your business.
Do I need to pay self-employment tax?
Yes, as a sole proprietor, you are responsible for self-employment tax, which covers Social Security and Medicare taxes.
What if I have losses in my business?
If you have business losses, you can use them to offset other income on your tax return, which may reduce your overall tax liability.
Should I consider forming an LLC instead?
Forming an LLC can provide liability protection and may have different tax implications, so it's worth considering based on your situation.
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