Taxation of Sole Proprietorship
How to account for a business actvity
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How is a Sole Proprietorship Taxed?
A sole proprietorship is not a separate tax entity. Sole proprietorship income is treated as personal income of the owner. That is, the profits or losses of the sole proprietorship pass through to the personal income taxes of the owner. The sole proprietor is responsible for paying in a timely manner any taxes associated with income. The owner must make estimated income tax payments periodically throughout the year. Further, the sole proprietor must pay self-employment taxes. These are combination of social security and medicare taxes. See our accounting resources for more information on business entity taxation.