When a company closes a financial year with a profit, it generally must pay taxes. In contrast to corporations, the income taxation of the sole proprietorship is not separated from the income taxation of the natural person. Therefore, the profits from the business activity of a sole proprietorships are reported in the private tax return.
As sole proprietorships are not legal entities, they are not taxable as companies. On the one hand, owners of sole proprietorships are taxed on their private and business income, i.e., on salary, business profit, income from securities and other income. On the other hand, private deductions and business expenses can be considered in the calculation of taxable income. The same applies to private and business assets.
Deductibility of the tax burden
Unlike corporations, sole proprietorships cannot deduct tax expenses from their net taxable profit. Business-related expenses as well as depreciation and provisions can be deducted from the profit in the normal way as for other companies and are recognised for tax purposes.
Loss compensation for self-employed persons
Any losses from self-employment are first offset against income from the same tax period and thus reduce the tax burden. Excess losses that have not yet been set off can be set off against business income and other income for the following seven years.
Delimitation of private and business expenses
Since expenses that are justified by business use related with the self-employed activity can be deducted from the income, it is important to keep private expenses and business expenses separate. It is very important to ensure that business trips, rental shares, company cars, expenses and further training costs are correctly delimited. In the event of an audit, all deductible expenses must be supported by documentary evidence.
Findea helps you keep track of your company's assets at all times.
