Kentucky Rules on Sole Proprietorship

by Elizabeth Rayne
Many independent entrepreneurs own sole proprietorships.

Many independent entrepreneurs own sole proprietorships.

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Sole proprietorships are common business structures because they are relatively simple to set up and provide flexibility in management. As a sole proprietor, you may independently manage your business and retain its profits. However, sole proprietorships do not provide limited liability as other business entity types, such as corporations, provide. Kentucky business registrations are handled by the Business Services section of the Secretary of State's office. The state requires all business types, including sole proprietorships, to also pursue professional licensing and tax registration.

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Sole Proprietorship Formation

Kentucky allows sole proprietors to operate a business without any registration, provided the owner operates under her own name. A sole proprietorship is formed as soon as an individual begins doing business, but in some cases, may later pursue professional licensing or tax registration. A sole proprietorship does not have a separate existence from its owner; instead, the assets and profits of the business belong solely to the owner of the proprietorship. Unlike an incorporated business, the sole proprietor remains personally liable for the debts and obligations of the sole proprietorship. Essentially, a sole proprietorship is merely the alter ego of the owner.

Assumed Name Registration

Although you do not need to register with the state to do business under your own name as a sole proprietor, if you would like to do business under a name other than your own, you must register your assumed business name. Assumed name filings for sole proprietorships are filed with the county clerk in the county where the principal place of business is located. Contact the clerk in your county to determine the assumed name filing procedure.

Professional Licensing

While your sole proprietorship may be formed without registration, depending on the type of business you are operating, the state may require you to pursue professional licensing before you can open your doors to the public. Nail salons, plumbing businesses, tattoo studios and veterinarian offices are among the professional businesses that require licensing. Visit the Kentucky Business Portal to determine if you must pursue a professional license for your business.

Tax Registration

If your business collects sales tax or has employees, the state requires you to register with the Kentucky Department of Revenue. All employers and businesses that operate as retailers must register with the department. Generally, all business tax registrations may be completed by submitting form 10A100, Kentucky Tax Registration Application. However, sole proprietors who do not have employees and do not collect sales tax are likely not required to register with the Department of Revenue.