A sole proprietorship is a company run and owned by one person. Due to the fact that there is just one owner, the company’s liabilities and debts are entirely individually borne by the owner. On the other hand, a DBA (doing business as) is a way for an individual to run a business under a different name rather than being a separate legal body. Even though they are operating under a different name, the owner in this instance is still a sole proprietor. In order to address your question, a sole proprietorship is not permitted to have three owners, however a company that operates under a DBA is permitted to have several owners. Independent Contractor vs. Sole Proprietorship
People who work for themselves and are not employed by another company are considered self-employed. Many independent contractors run their businesses as sole proprietors, which means they are in charge of every aspect of the company and its operations. It’s crucial to understand that being self-employed is different from being a sole proprietor. A sole proprietorship is a legal entity, whereas self-employment is a tax status. Therefore, while a self-employed person may choose to operate as a sole proprietor, they may also opt for another ownership structure, such as an LLC or partnership. A single-member LLC (limited liability company) is a type of business entity that combines the tax advantages of a partnership with the liability protection of a corporation. A single-member LLC, as the name suggests, only has one owner. Therefore, a single-member LLC might not be the ideal choice if you want to launch a corporation with three owners. It is important to remember that the IRS does regard single-member LLCs as distinct legal entities, which entitles them to certain tax advantages and protections. Favorable Features of a Single-Member LLC
A single-member LLC might be a fantastic option for people who want to launch a business as a sole proprietor. The liability protection it provides is one of its greatest benefits. The LLC is protected from the owner’s personal assets because it is a separate legal entity with its own debts and liabilities. Single-member LLCs also have pass-through taxes, which means that the business’s gains and losses are transferred to the owner’s personal tax return. Since the owner only pays taxes on the earnings they get, this might result in large tax benefits.
The ownership structure of a company can include three owners, but it will depend on the specific conditions. Businesses with numerous owners should avoid sole proprietorships and self-employment, but they can be accommodated by DBAs and other legal structures like partnerships and LLCs. Single-member LLCs provide important benefits for sole proprietors, including as pass-through taxation and liability protection. To choose the right ownership structure for your unique circumstances, it’s crucial to speak with a legal and financial expert before beginning a firm.