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Avoid Improper Usage Of Schedule Cs or Sole Proprietorships

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Having a Sole Proprietorship and filing a Schedule C has its place, but you need to tread carefully. Schedule C filers are among the highest risk groups for audit, and thus it is vital to keep accurate records to support your positions in case the IRS desires to confirm them. Here is a quote from the Wall Street Journal<:

Change your business status. IRS Statistics< show that you are 10 times as likely to be audited as a Schedule C filer than if you incorporate your business and elect S corporation status. While it costs a bit of money to incorporate, the move affords you greater personal liability protection and reduces your chances of being audited. In deciding whether to change your business status, include both tax and non-tax factors.

Generally it is better to start a company, often a LLC with the proper tax status elected.