Forming a Sole Proprietorship
sole proprietor
A sole proprietor is someone who owns an unincorporated business by themselves.
You don’t have to take any formal action to form a sole proprietorship. As long as you are the only owner, this status automatically arises from your business activities. In fact, you may already own one without knowing it. If you are a freelance writer, for example, you are a sole proprietor. Because you and your business are one and the same, the business itself is not taxed separately—the sole proprietorship income is your income. It’s your responsibility to withhold and pay all income taxes, including self-employment and estimated taxes.
Business Requirements
As is the case when you own any kind of business, you may need to obtain the necessary licenses and permits. For example, certain businesses, like ones that sell alcohol or firearms, require a federal license or permit. Some states have requirements for other specific businesses. Additionally, some professions such as Certified Public Accountants (CPAs) may have licensing or certification requirements that must be met before you can promote yourself as engaging in that business or trade. Regulations vary by industry, state, and locality.
If you choose to operate under a name different from your own, you will most likely have to file a fictitious name (also known as an assumed name, trade name, or DBA name—short for “doing business as”). This document is usually filed in the records of the county or city in which you do business. This requirement exists, because if customers want to contact (or sue) the person running the business, then the law requires the owner to inform the public of the person behind the “business.” You must choose an original name; it cannot already be claimed by another business. In order to check the availability of a business name, business owners may search the database maintained by the Secretary of State. Visit this webpage to learn more about naming your business.