There are pros and cons to every business model. Some people would never consider opening a business that didn’t have it’s own tax identification number. Others are perfectly happy to work for themselves and pay self employment taxes and assume all risks and liabilities for their small business. Therefore, the corporation versus a single proprietor business model will have different appeal, depending on who you talk to.
There is definitely a simplicity to the single proprietor model. This kind of small business is usually one that has no employees. It is an individual who offers services or sells goods on his own. Some examples would be a gardener, or someone who sells homemade candles. These people would list their personal social security number as their tax identification number. They would assume all responsibility and liabilities related to the business. They could be directly sued by customers or creditors. Typically, these kinds of businesses are not making large sums of money. They are very low risk for the owner.
If a small business has a higher potential profit, and it is at a higher risk of being sue or requires more capital to get started, it may be formed as some sort of corporation that protects the owner as a private individual. Corporations have their own unique tax identification number, and they can be owned by one or several people. The corporation status makes sure that the company is liable, but not the owners. Retail stores, service companies, and small businesses with several employees will usually designate themselves as corporations. There are a number of corporation types that the business owners can choose from, and they should probably consult their accountant or lawyer before creating their business designation. Corporations are more complicated to run, but they’re much safer for the owners.