Overview of a Sole Proprietorship
When it comes to liability for the debts and taxes incurred by a business, the owner of a sole proprietership is personally responsible. In a sense, the owner and the company are treated as one, with only one tax return filed and no separation between personal and company assets. For this reason, so long as the owner operates the business under his or her name, most states do not require the company to be registered, provided that the business is not operating in a regulated industry and no professional licenses need to be obtained.
Operating a sole proprietorship in multiple states can be straightforward, but it requires compliance with the specific requirements of each state, which can be conflicting. A small number of states, including Nevada, do mandate that all companies, regardless of type, register their business with the state. In addition, certain regulated industries require that specific licenses be obtained before beginning operations. An example would be a business owner wishing to sell tobacco products in Alaska, which requires obtaining a state business license endorsement.
In addition to occupational and professional licenses, some states require a sole proprietor to obtain a local sales and use tax permit if the business will sell goods or services within its borders. Further, regardless of what transactions are involved in the business, any state where income is generated typically requires the filing of a state return and payment of associated taxes.
Registering Fictitious Names
By default, sole proprietorships take the name of the owner. However, for the purposes of branding, many owners choose to operate under a fictitious, or Doing Business As, name. DBAs often require state registration, and in most states, no two businesses can have the same fictitious name. For that reason, an owner must register the fictitious name in every state where the business operates and DBA registration is required.