Sole Proprietorships

Reported on Schedule C of Form 1040, income is subject to individual rates of 10% to 37%, plus selfemployment tax.*

Proprietors are subject to personal liability for all aspects of the business.

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If you are a sole proprietor, you may want to consider an LLC. Single-owner LLCs are not tax-paying entities. The business shows up on your personal return as it has in the past, but you have the limited liability protection of the LLC entity.

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* Owners of business entities, which are not taxed as ā€œCā€ corporations, are eligible for a 20% Qualified Business Income (QBI) deduction. The deduction for QBI may be limited and/or subject to phase-out, depending on the taxable income of the individual, as well as such factors as the type of business, amount of wages paid by the business, and amount of capital assets owned by the business. For income above $326,600, the legislation phases in limits on what otherwise would be an effective marginal rate of not more than 29.6%.