How to Get a Sole Proprietorship

By Elizabeth Rayne

For an independent entrepreneur, a sole proprietorship is a common business structure because it is relatively simple to set up and allows for a great deal of flexibility in management. As a sole proprietor, you are personally liable for the business, but you also retain all of the business's profits. Although there are some similarities for all sole proprietorships, business formation is determined by state law where the sole proprietorship is formed.

For an independent entrepreneur, a sole proprietorship is a common business structure because it is relatively simple to set up and allows for a great deal of flexibility in management. As a sole proprietor, you are personally liable for the business, but you also retain all of the business's profits. Although there are some similarities for all sole proprietorships, business formation is determined by state law where the sole proprietorship is formed.

Formation

Most states do not require sole proprietorships to register with the state in order to operate. Instead, a sole proprietorship is automatically formed as soon as an individual starts doing business on her own. A sole proprietorship is essentially the alter ego of the owner, who remains personally liable for the business's debts and obligations. Unlike an incorporated business, the assets and income of the sole proprietorship are not distinguishable from the owner's.

Ready to start your LLC? Start an LLC Online Now

Licensing

The state or county where your sole proprietorship is located may require the business to obtain professional or occupational licenses or permits based on the type of business involved. Some cities or counties require local businesses to register to obtain a business license or tax registration certificate. Additionally, if you work as a professional, such as a doctor, accountant or architect, the state imposes additional licensing requirements before you may work with the public. If you sell alcohol, firearms or other regulated goods, you must pursue additional licensing at the state or federal level.

Tax Registration

If your business plans to hire employees, or collect sales tax, you must register with the state tax authority. As an employer, you must register for an Employer Identification Number with the IRS. Some sole proprietors apply for an EIN for federal tax purposes, even if they do not have employees, so they don't have to operate the sole proprietorship under their Social Security number.

Assumed Business Name

If you want to operate your business under a different name than your own, you must obtain an assumed business name, also known as a fictitious business name. Depending on where your business is located, you should register a fictitious business name with either the state or local county clerk. However, not all states require sole proprietorships to register assumed business names. Contact your state's business registrar to determine how to register yours.

Ready to start your LLC? Start an LLC Online Now
Sole Proprietorship in Georgia

References

Related articles

The Requirements of a Sole Proprietor in Pennsylvania

Sole proprietorships are common business entities because they are simple to set up, and have relatively few filing requirements. By definition, a sole proprietorship is owned by one person, who remains personally liable for the debts of the business. Most states, including Pennsylvania, do not require sole proprietors to register the business. However, depending on the business type, a business owner may be required to file for licenses, permits and tax registration.

Guide to Setting Up a Sole Proprietorship in Florida

A sole proprietorship operates as an alter ego of the business owner who runs it. Since the owner is personally responsible for business affairs, Florida does not require a separate state-level registration for the business as long as you operate it under your own name. If you want to run the business under a different name, you must register it with the state. Depending upon the type of business you are conducting and where you are located, you may also have to obtain local licenses and permits to before you can open for business.

Difference in Business License & Registering a Business

Starting a business can be complicated. In addition to hiring employees, finding a location and establishing clientele, new business owners must also ensure they properly register with government authorities and obtain all necessary government licenses. Without the proper registration and licensing, a business can face fines and penalties. Registration and licensing requirements vary between states and localities.

LLCs, Corporations, Patents, Attorney Help

Related articles

How to Register a Business Entity

It is essential that you register your business properly to avoid fines and penalties from the federal government and ...

Kentucky Rules on Sole Proprietorship

Sole proprietorships are common business structures because they are relatively simple to set up and provide ...

What Is Needed to Establish a Sole Proprietorship in Indiana?

A sole proprietorship is a business owned by one person who assumes all the debts and liabilities for the business. It ...

How to Best Protect a Sole Proprietorship in North Carolina

By operating a business as a sole proprietorship, you are taking on all responsibilities and liabilities for the ...

Browse by category