Steps in Formation of Sole Proprietorship in Wisconsin

By Jim Thomas

As the Wisconsin Bar Association puts it, choosing the form of your business is similar to buying a car. There are a certain number of models you can choose from with their own customized features. A sole proprietorship – a business with one owner who makes the management decisions – is the easiest type of business entity to establish. However, it's important to set up your sole proprietorship correctly, which might mean registering the name of the business and obtaining an Employee Identification Number (EIN) from the Internal Revenue Service for tax purposes.

As the Wisconsin Bar Association puts it, choosing the form of your business is similar to buying a car. There are a certain number of models you can choose from with their own customized features. A sole proprietorship – a business with one owner who makes the management decisions – is the easiest type of business entity to establish. However, it's important to set up your sole proprietorship correctly, which might mean registering the name of the business and obtaining an Employee Identification Number (EIN) from the Internal Revenue Service for tax purposes.

Creation of Sole Proprietorship

"No legal formalities are required to bring this form of business structure into being, and there are no particular formalities necessary for operation," explains the State of Wisconsin. In essence, there is no legal separation between you and your business. All the profits go to you and all of the liabilities and obligations of a sole proprietorship are your responsibility as well.

Ready to start your LLC? Start an LLC Online Now

Business Name

In many states, you are required to register the name of your business if it is different from your legal name. So if your name is William Shakespeare and you want to open a business called William Shakespeare Books, you would need to file a DBA ("doing business as") name in the county or state where your business is located. However, in Wisconsin, registration for a DBA, called a "firm name," is optional. You can choose whether to file a Registration of Firm Names in the county or a trade name, another term for a DBA name, with the secretary of state, or neither. If you do file, you're required to pay a small fee and check county and state databases to make sure no one is already using the same name.

Employee Identification Number

If your sole proprietorship has employees, you'll need to obtain an Employee Identification Number from the Internal Revenue Service, which is accomplished by filing Federal Form SS-4 with the IRS. Even if you don't have employees, some sole proprietors obtain EINs because it often makes it easier to open a bank account for the business.

Considerations

Although it's easy to set up a sole proprietorship, you might need more than a stripped-down, basic-model new car. In a sole proprietorship, you're personally liable for the debts of the business, which can enable a creditor to go after your home and all of your other assets. Another type of business structure, such as a limited liability company, can enable you to shield your personal assets. It also offers you the same tax advantages as a sole proprietorship.

Ready to start your LLC? Start an LLC Online Now
How to Start a Company As a Sole Proprietor in Georgia

References

Related articles

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.

What Do You Need to File as a Sole Proprietor?

For entrepreneurs who want to operate a business without a legal entity, they can do so and operate as a sole proprietor. An advantage to operating as a sole proprietor is that you can start your business operations immediately rather than having to go through the process and expense of creating a corporation or a limited liability company. However, sole proprietors are personally liable for all debts and obligations of their business, unlike business entities.

Putting a Sole Proprietorship on Paper

One of the advantages to operating a business as a sole proprietorship is the lack of formal organizing requirements. A photographer, personal trainer or anyone who runs a one-person operation can start doing business as a sole proprietor without necessarily filing any paperwork with the government. Operating a business this way can be disadvantageous, however, when the proprietor wants to prove the existence of the business as a distinguishable entity. When an owner wants to open a credit account, set up services in the name of the business or otherwise separate business operations from his personal affairs, it helps to have some written documentation that verifies the company's status.

LLCs, Corporations, Patents, Attorney Help

Related articles

Forms and Fees for Registering a Sole Proprietorship in Mississippi

Starting a sole proprietorship in Mississippi is an easy way to get your business operations underway since it ...

How to Register a Sole Proprietorship in North Carolina

As the Small Business Network Center in North Carolina explains, a sole proprietorship is a business owned and operated ...

How to Set Up a Business Name in Wisconsin

Your business name is the first thing your customers learn about you. Customers use it to recommend you to others, and ...

Rules and Regulations for a Sole Proprietorship

Starting your new business as a sole proprietorship is the easiest and least expensive legal business structure you can ...

Browse by category
Ready to Begin? GET STARTED