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.

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.

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.

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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.

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References

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Can an LLC Have More Than One DBA?

Running a successful business requires a keen understanding of the marketplace. In the initial stages of operations, this foresight is important for determining how to structure a company and the names it will use in conducting transactions with the public. A limited liability company allows owners to enjoy the "pass-through" tax advantages of partnerships as well as avoiding personal liability for the business's debts. While state law requires that LLCs operate under the legal name contained in their Articles of Organization, sometimes this name is not desirable from a branding perspective, particularly if the company will market very different products or services. In that case, the LLC can register one or more "doing business as" names with the state.

Can You Have More Than One DBA for a California Corporation?

In California, an incorporated business is eligible to hold itself out to the public under a fictitious business name, or DBA, that’s different from the corporation’s legal name. There are a number of advantages to using one or more DBAs for a California corporation, such as when the legal name doesn’t exactly relate to the business. But before you can start using a DBA, you’ll need to file some paperwork in the California county where your business operates.

Advantages of Filing for a DBA

Filing for a DBA is the easiest type of business registration. The acronym "DBA" is short for "doing business as" and is generally used when referring to any type of fictitious name, assumed name or trade name for your business. Filing for a DBA is most advantageous when you are just starting your business, but as you become established you should consider the advantages offered by other forms of business registration.

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