What Special Paperwork Is Necessary to Start a Sole Proprietorship?

By Jane Meggitt

Compared with other business structures, starting a sole proprietorship requires relatively little paperwork. If you own a business as a sole proprietor, you personally are the business for practical purposes. Necessary paperwork depends on the kind of business you are engaged in or the service you provide; the paperwork also depends on your local and state regulations.


If your sole proprietorship has a name other than your own, in most states you must register it as a trade name or "doing business as" name with the state in which you operate the business. The specific paperwork necessary for this registration varies by state. Check with the clerk's office in the county in which your business is based for the rules in your jurisdiction. In some states, such registration must also be done at the state level by the secretary of state's office.

Employer Identification Number

Some sole proprietors have to apply to the Internal Revenue Service for an Employer Identification Number. If you purchase an existing sole proprietorship, or inherit such a business, you cannot use the former owner's number -- you must apply for your own. You must also apply for an EIN if you hire employees. The IRS prefers that EIN applications are filed online on its website. It's a matter of filling out one simple form. If you apply online, you receive your EIN the same day.

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You may consider trademarking the name of your business to keep others from using the same name. Trademarking, also protects you if your business name could become a "brand." According to the US Patent and Trademark Office, trademarking's benefits include "legal presumption of your ownership of the mark and your exclusive right to use the mark nationwide on or in connection with the goods and services listed in the registration." According to the USPTO, most applicants use an attorney to file trademark paperwork, as filings may be complex and must be very specific. A third-party legal document preparation service might also help with this task.

Business Licenses

Depending on the nature of your business or service, you may need to apply for a business license or tax registration certificate, in the state or municipality in which it is located. Go to the municipal clerk's office in the town or city in which you are doing business or check online to find out what paperwork is required in that jurisdiction. For example, in Washington state, a sole proprietor who grosses more than $12,000 annually or who does not conduct business under his own name needs a license. In this instance, the form for the license takes between 15 and 30 minutes to complete. Supplementary forms may be necessary, but it all depends upon on the nature of your business. For a tax registration certificate, you would use either your Social Security number or the business EIN.

Separate Bank Accounts

Depending on the nature of your business, it may be wise to open separate checking accounts for your business rather than use your personal account for business-related expenses. If you are not using your own name for the business, banks may require documentation such as the business license or trade name registration to open the account.

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Guide to Setting Up a Sole Proprietorship in Florida



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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.

What Forms Need to Be Filed for a Sole Proprietorship?

A sole proprietorship is one method of organizing and operating a business. A sole proprietorship operates as an alter ego of the owner, not as an independent legal entity, giving the sole proprietor complete control of the business. Depending on your state, you may or may not need to file a form to create a sole proprietorship. However, you should contact the Secretary of State's office to determine the proper procedure. For example, the state of Indiana requires all sole proprietors to register with the Indiana Department of Revenue by submitting a Business Tax Application if the business sells products or food.

How to Set Up a Sole Proprietorship Using a DBA

A sole proprietorship functions as an alter ego of its owner. State law requires you to operate the business under your own name, so the public knows who to hold responsible for business activity. For example, a personal trainer named John Smith must have his customers pay him by writing a check to “John Smith.” He cannot call his sole proprietorship “In Shape Personal Training” and operate under that name unless he registers the name with the state as a fictitious business name, also known as a “doing business as” (DBA). Most states process DBAs at the county level, so the name registration is only good in that one county. A few states, like Florida, process DBAs at the statewide level, which entitles the owner to use the name anywhere in the state.

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