Sole Proprietor [BEST]
A sole proprietor is someone who owns an unincorporated business by himself or herself. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation.
To start a sole proprietorship, you generally just have to launch your business. It is useful to choose a company name. Depending on your business and local regulations, you may need to apply for a permit or license with your city, county, or state. If you plan to hire employees, you will need an employee identification number (EIN) from the Internal Revenue Service (IRS). If you are going to sell taxable products, you will need to register with your state for a sales tax license.
Filing taxes as a sole proprietor requires you to fill out the standard tax Form 1040 for individual taxes and Schedule C, which reports the profits and loss of your business. The amount of taxes you owe will be based on the combined income of both Form 1040 and Schedule C. If you have employees, there will be other forms to fill out.
Sole proprietorships are the most common and simple form of business organization. They are formed by persons who own all or most of the business property and assets. They are 100% responsible for all of the control, liabilities and management of a business. A sole proprietorship, as its name states, has only one owner. The sole proprietorship is merely an extension of its owner: a sole proprietor owns his own business, and no one else owns any part of it.
As the only owner, the sole proprietor has the right to make all the management decisions of the business. In addition, all the profits of the business are his. In return for his complete managerial control and sole ownership of profits, he assumes great liability: he is personally liable for all the obligations of the business. All the debts of the business, including debts on contracts signed only in the name of the business, are his debts. If the assets of the business are insufficient to pay the claims of its creditors, the creditors may require the sole proprietor to pay the claims using his individual non-business assets, such as money from his bank account and the proceeds from the sale of his house. A sole proprietor may lose everything if his business becomes insolvent. Hence, the sole proprietorship is a risky form of business for its owner.
In light of this risk, some people ask why any person would organize a business as a sole proprietorship? There are two reasons. First, the sole proprietorship is formed very easily and inexpensively. A person need merely set up his business to establish a sole proprietorship. No formalities are necessary. He may have a sole proprietorship even though he does not intend to create one. Second, few people consider the business-form decision. They merely begin their businesses. By default then, a person going into business by himself automatically creates a sole proprietorship when he fails to choose another business form. These two reasons explain why the sole proprietorship is the most common form of business in the United States.
Because the sole proprietorship is merely an extension of its owner, it has no life apart from its owner. It is not a legal entity. It cannot sue or be sued. Instead, creditors must sue the owner. The sole proprietor, in his own name, must sue those who harm the business.
A sole proprietorship is highly transferable. "Transferability of ownership " refers to the ability of an owner of a business to sell or convey that ownership interest to another. Transferability also refers to the impact such a transfer will have on an existing business venture. Transferability varies greatly among business organizations.
The "duration of a business" is the measure of the business' ability to operate even upon the death, retirement, or other incapacity of the owner. The business' duration depends heavily on the form of business organization selected. A sole proprietorship usually terminates automatically upon the death or incapacitation of the owner/proprietor.
The ability to raise capital for a business is limited by the nature of the business organization. The immediate and long-term financial needs of a business are very important factors in selecting a business organization. Sole proprietorships are the most limiting form of business organization in terms of raising capital. The principal source of capital is the proprietor's personal wealth or personal credit-worthiness for borrowing purposes.
Federal and state taxation have influence on the type of business organization to form. Tax treatment varies widely. Typically, the income of a sole proprietorship is taxed as the personal income of a proprietor. The business itself does not pay taxes on its profits.
When a sole proprietor conducts business under an assumed name, that name must be registered with the Utah Division of Corporations and Commercial Code using an application available from the Division. Also, be certain to obtain all required local and municipal business licenses before commencing business.
Workers' compensation coverage is required for sole proprietors with employees, including part-time employees, borrowed employees, leased employees, family members, and volunteers (WCL 3 Groups 1-14-a).
A major decision made when starting a business is the name. Once the name is selected, it is important to register with the Secretary of State. This will ensure that the business name is not currently in use. Registering your name with the Secretary of State will ensure it is solely yours and cannot be used by any other company in the state of Ohio.
For a sole proprietor, the legal name of the business is your personal full legal name. A DBA (doing business as) name can also be used by a sole proprietor, but it must be registered with the Secretary of State to ensure that the name is not currently in use by any other company in the state of Ohio..A partnership would either list the last names of the partners or would register a DBA name with the Secretary of State. The DBA name must be registered with the Secretary of State to ensure the name is not currently being used by any other company in the state of Ohio.
Starting a small business is an increasingly popular career option today, with sole proprietors and independent contractors enjoying the flexibility and tax deductions that full-time employment doesn't typically offer.
Sole proprietors and independent contractors are self-employed individuals who go into business without registering their business as a legal entity such as a corporation, a partnership, or a limited liability company (LLC).
Sole proprietors report their business income and business expenses to the IRS on their personal income tax returns by attaching Schedule C, Profit or Loss from Business (Sole Proprietorship) to their Form 1040 or 1040-SR.
For example, a software developer who decides to start their own business quickly and easily might choose to operate as a sole proprietor, which does not require setting up a separate corporation and allows for the filing of personal and business tax liabilities on Form 1040.
Sole proprietors have less tax complexity than independent contractors but risk exposing their personal assets to business litigation, debt collection, or bankruptcy proceedings. Sole proprietors should be fully insured to protect against the major risks of doing business, such as:
Car accidents: Personal auto insurance may not cover accidents you have while driving a company car. If you injure another driver, you could be sued, and without commercial auto insurance, you could be personally liable for this expense. Sole proprietors who drive their personal cars for business purposes should opt for hired and non-owned auto insurance (HNOA).
County clerks are separate for all five boroughs of New York City. Their contact details are at the end of this page. A legal name is the name under which your business incorporated in New York State. If you use a trade name, you will likely need a Certificate of Assumed Name. This rule differs for sole proprietorships and general partnerships:
Sole proprietorship: The most common and the simplest form of business is the sole proprietorship. In a sole proprietorship, a single individual engages in a business activity without necessity of formal organization. If the business is conducted under an assumed name (a name other than the surname of the individual), then an assumed name certificate (commonly referred to as a DBA) should be filed with the office of the county clerk in the county where a business premise is maintained. If no business premise is maintained, then an assumed name certificate should be filed in all counties where business is conducted under the assumed name.
A sole proprietorship is a one-person business that, unlike corporations and limited liability companies (LLCs), doesn't have to register with the state in order to exist. If you are the sole owner of a business, you become a sole proprietor simply by conducting business. Even though there aren't complicated start-up requirements for establishing a sole proprietorship, there may be local registration, business license, or permit laws you need to comply with to make your business legitimate. You also need to know about your income tax and business debt obligations because as a sole proprietor you are personally responsible for paying these debts.
To find out what you need to do to establish a sole proprietorship in your state, choose your state from the list below. You will find all the specifics and information you need, including links to forms, government agencies, and other valuable resources.
If you are a sole proprietor and do not have a federal Employer Identification Number (EIN), or if you would rather use your social security number instead, you can skip the EIN field in the account activation form altogether. 041b061a72