So a husband and wife cannot be a sole proprietorship.
This term relates to ownership and not the number of employees.
You first need to form a company from which to run the business.
Here’s a summary of the key provisions and implications for the most used company structures.
Therefore, you should account for your business as a separate entity from your personal affairs.
On Schedule C, owner’s compensation is not an expense line item because it assumes that the difference between revenues and expenses, meaning net income, is the owner’s salary.
When you start a new business, one of the first decisions you’ll have to make is how to structure your company.
This choice can be critical to the future health of your business.
While this may sound dire, for many small businesses, there may be few instances when this occurs.
When filing taxes for your sole proprietorship, use your personal IRS Schedule 1040 and attach Schedule C (“Profit or Loss from Business”), which, in effect, is a mini business income statement.