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Plenty of sole proprietors around but they're not racking in much

By Dian Vujovich

For many, the thought of working for yourself and not having to answer to anybody, working any time of day or night or dealing with annoying co-workers would be like a dream come true.

Then imagine doing that as a sole proprietor—the most popular type of business entity around—with no board members to satisfy. Or, as a limited liability company. Pretty sweet dreamin, right? Well… when it comes to making money, the record for sole proprietors isn’t so hot.

A little background.

According to the IRS, tax returns from 2007 showed over 23.1 million sole proprietor filings. That’s nearly double the amount filed 25 years ago in 1986.

Over that same period of time, the number of partnerships grew from 1.7 million to nearly 3.1 million and the number of corporations increased from 3.4 to nearly 5.9 million. Of the three, corporations brought in the most money.

But when it comes to the bottom line, sole propiretors report the least in profits. In 2007, while they reported over $281 billion in net income corporations reported nearly seven times that amount.

Figures from 2008 show that the average sole proprietor’s net income was about $12,000. That’s 1,000 bucks a month—hardly enough to cover a few meals with friends at Café L’Europe.

So why the low income when the IRS reports that the net income of businesses in American have increased from 1980 to 2007? Apparently it’s not due to the recent Great Ressession. Turns out sole proprietors revenues have been declining for years. Ouch.

More info and charts on the subject at: http://tinyurl.com/45hv75r .

To read more articles, please visit the column archive.

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