A sort of company entity that is owned and run by one person is a sole proprietorship. It is the most straightforward type of business and is frequently the first option for entrepreneurs launching their own companies. However, a sole proprietorship must abide by federal laws and regulations just like any other type of business.
The tax legislation is among the most significant federal regulations that pertain to sole proprietorships. The revenue of a sole proprietorship is taxed as the owner’s income because it is not a distinct legal entity. The owner is required to include a Schedule C with their personal income tax return in order to disclose the revenue and outgoings of the company. Additionally, they must pay self-employment taxes, which cover Medicare and Social Security contributions.
Labor law is another federal regulation that pertains to sole proprietorships. A sole proprietor who hires employees must abide by federal labor rules such the Occupational Safety and Health Act (OSHA) and the Fair Labor Standards Act (FLSA) as an employer. While OSHA creates workplace safety requirements, the FLSA establishes minimum wages and overtime regulations.
Depending on the kind of business it runs, a sole proprietorship could also be subject to government restrictions. For instance, the company must abide by federal product safety laws and regulations if it sells products. If a company gathers customer personal data, it must abide by federal privacy rules including the Gramm-Leach-Bliley Act and the Health Insurance Portability and Accountability Act (HIPAA).
The drawbacks of a DBA
DBAs, or “doing business as,” are made-up names that companies employ in place of their legal names. A DBA has various drawbacks even if it can be a great tool for branding and marketing. A DBA does not give the business owner any legal protection, which is one of its key drawbacks. The owner’s personal assets may be at risk if the company is sued.
A DBA has the additional drawback of offering no tax advantages. The income of the business is still taxed as the owner’s income because a DBA is not a distinct legal entity. A DBA does not offer any liability protection, either. The proprietor can be held personally responsible for any losses if the company is sued.
An LLC, or limited liability company, is a distinct legal entity from a DBA. In the event that the company is sued, the owner’s personal assets are shielded by an LLC’s liability protection. An LLC also offers tax advantages because corporate income is taxed separately from owner personal income. How Does a DBA Operate?
A DBA is a made-up name that a company uses in place of its actual name. A “doing business as” certificate must be submitted to the state or county where the company is located in order to register a DBA. The DBA name may be used by the company for branding and marketing once the certificate has been issued.
A DBA: Is It Worth It? Depending on the specific requirements of the business owner, a DBA may or may not be worthwhile. A DBA does not offer any legal or tax advantages, although it can be helpful for branding and marketing purposes. An LLC may be a preferable choice if the business owner wants liability protection and tax advantages.
In addition, is a DBA superior to a PhD??” is unrelated to the topic of the article “Federal Laws that Apply to Sole Proprietorship”. The article discusses the federal laws that apply to sole proprietorships and does not compare or contrast a DBA and a PhD.
If you are conducting business as a sole proprietorship and have registered a trade name for your medical practice, you are permitted to practice medicine while using a DBA (Doing Business As). However, having a DBA as a doctor has no bearing on your legal standing or the federal statutes that apply to your sole proprietorship’s operation. You must abide by federal laws like tax laws, employment rules, and healthcare laws as a sole proprietor because you are individually responsible for any business debts and liabilities.