Do you want to start your own business and sell as you wish? Then a sole proprietorship may be the best option for you. Especially for those who want to start a new business at a much lower cost, sole proprietorship is a business with the lowest capital. In this article, we will examine in detail what is a sole proprietorship, how to establish one, and the advantages of a sole proprietorship.

What is A Sole Proprietorship?

What is a sole proprietorship? A sole proprietorship is the simplest type of company in which a single person assumes all rights and responsibilities. In a sole proprietorship, the business and the owner have separate legal entities. It is a business option that is quite easy to set up and operate and does not must large capital. Thus, it is a great way of start-up for entrepreneurs. These are companies created by one person or in partnership with more than one person and the responsibilities belong to these people. The opening of this type of company takes place in a short time, so it is preferred because it is easy and fast.

How Does a Sole Proprietorship Work?

In a sole proprietorship, the business and the business owner are the same person. This means that all assets and liabilities of the business belong to the business owner. The earnings of the business are considered the personal income of the business owner and are taxed accordingly.

What is a sole proprietorship business? A sole proprietorship is a business activity conducted by a single person who is registered with the IRS. In this type of business, the owner and the business itself are not separate legal entities.

Decide on a Business Name

You have decided to start a business and have defined your business. Now it is time to choose a name for your business. Choose a name that reflects your company's business and industry. This name must not have been used before.

Register the Business Name

Go to the Chambers of Commerce and Industry and register your business name. You will need to pay the required documents and fee for this process.

Obtain an Employer Identification Number

A tax identification number is a 10-digit number used by taxpaying natural and legal persons when paying taxes at public institutions. You can get an Employer Identification Number (Tax Office Registration Number) (VKN) for your business by going to the Tax Office and using this number to pay your taxes. You can get it by applying to the Tax Office together with your identity card and if you are a legal entity with the establishment agreement and/or registration request.

Open a Business Bank Account

Open a separate bank account for your company. This way you can separate your financial transactions from your company's financial transactions.

Understand Your Tax Responsibilities

As a sole proprietorship, you need to pay income tax and withholding tax on your earnings. You may also be required to pay premiums to Bağ-Kur. You should take your tax responsibilities and do not forget to follow up.

Plan for Your Business's Future

A business plan, which includes the goals of a business and what is needed to achieve these goals, is a must for a business. Determine your company's goals and how you will achieve them by preparing a business plan. Preparing a business plan will be a road map for you. With your business plan, you can research your competitors and follow market trends. It also allows you to see your income and expense situation. Having a solid plan to build and sustain a successful business provides many benefits. It helps you set your goals, understand the market, create a strategy, make financial planning, and manage your business.

Promote Your Business

Promote your business to potential customers using channels such as websites, social media, and advertising. The more opportunities you have to promote your business, the more potential customers you will attract.

Advantages of Sole Proprietorship

The sole proprietorship advantages are quite many. Let's talk about the advantages of this type of company setup, which is an ideal start for starting your own business;

• Easy to set up and operate.
• There is no greatest capital need.
• Bureaucratic procedures are few.
• Offers tax advantages.
• Having a progressive tax system according to income.
• Low cost compared to other types of companies.
• The procedures are completed in a very short time. Your company will be established in a few days.
• Closing procedures can be done in 1 day.
• Book certification fees are low.
• Low financial advisor or accountant fees.
• Easy and quick to set up with less paperwork.
• Can be set up by one person.

What taxes do Sole Proprietors Pay?

The taxes paid by sole proprietorships are as follows:

• Income Tax
• Value Added Tax (VAT)
• Withholding Tax Declaration (Withholding taxes)

Sole proprietorships are often preferred because they do not must start-up capital and can be opened and closed easily, but they have to pay higher income taxes than capital companies. Sole proprietorships pay income tax and withholding tax on their earnings. They also have to pay premiums to Bağ-Kur. Income Tax is the tax accrued on the income of a business after deducting its expenses. It is calculated on the net income after deducting documented expenses. The higher the income level of these companies, the higher the rate of income tax payable. VAT (Value Added Tax) is another tax that you collect on behalf of the state on every invoice you issue. It is calculated every month and determined by the government at varying rates depending on the service or product groups.

Withholding tax is a type of tax calculated as 20% of the amount of services such as rent of your workplace, staff salary payments, attorneyship, and financial consultancy you receive. Since sole proprietorships are income taxpayers, the higher their income, the higher the tax they pay.

What is an example of a Sole Proprietorship?

If we talk about sole proprietorship examples;

• Tailor shops
• Hairdressers
• E-commerce companies
• Those who are self-employed (such as lawyers, doctors)

These include e-commerce entrepreneurs which have recently become popular on social media. A Sole proprietorship is an ideal option for starting your own business and realizing your entrepreneurial dream. It has many advantages such as being easy to set up and operate, having no largest capital must, and few bureaucratic procedures.