A sole proprietor has total control, receives all profits from and is responsible for taxes and liabilities of the business. If you are planning to use another name or business name to operate your company, state laws will require a trade name registration or filing of your company name. If you choose to operate under a name different than your own, you will most likely have to file a fictitious name (also known as an assumed name, trade name, or DBA name, short for "doing business as"). Sole Proprietorships. The “bottom-line amount” from Schedule C transfers to your personal tax return. Darrell Zahorsky is a former writer for The Balance Small Business. Use the Licensing & Permits tool to find a listing of federal, state and local permits, licenses and registrations you'll need to run a business. If considering starting a business as a sole proprietor, remember there are various advantages and disadvantages. Since sole proprietorships include only one employee—you—they are easy to establish and manage, and provide an uncomplicated business structure for independent contractors and entrepreneurs across numerous industries. The business owner is personally liable for the obligations of the business. A Limited Liability Company (LLC) is a business structure allowed by state statute. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation. How to Weigh the Pros and Cons of Incorporating Your Small Business. So you're open for business. A sole proprietorship is the easiest business structure to form (you only need to get a license or permit and register your business with your local government) (hence its popularity). A sole proprietorship is set up to allow an individual to own and operate a business. Sole proprietorship is a good, simple structure for them. A sole proprietorship is an unincorporated business with only one owner who pays personal income tax on profits earned. Because you and your business are one and the same, the business itself is not taxed separately-the sole proprietorship income is your income. He is an experienced search engine optimization (SEO) and marketing manager. The individual represents the company legally and fully. Setting up your proprietorship often does not require registration of the business. Limited liability company. The sole proprietorship is not a legal entity. Work with your business professional team of a lawyer and an accountant to determine the type of business structure best for you. Sole Proprietorship A sole proprietorship is the simplest and most common structure chosen to start a business. Catering companies may get started informally—for instance, one talented cook feeding their friend’s wedding guests—before taking off. This form of business has several advantages: From the IRS's perspective, your small business is a sole proprietorship unless you have registered it as a corporation or other business structure such as an LLC. Sole proprietorships are the simplest of all legal structures but they also lack many of the legal and financial protections of other business forms. As a result, the IRS treats you as both. Sole proprietorship: The most common and the simplest form of business is the sole proprietorship. The term “sole proprietorship” is used to describe a business that is owned and operated by one person who is referred to as the sole owner or sole proprietor. This type of business structure is unincorporated and you can receive all income from your business activities. Among the different business structures, sole proprietorship is considered and most basic and simplest form. In the eyes of the law, a sole proprietor isn’t a different entity from his business. Freelancers, from developers to copywriters, typically operate as sole proprietorships. Common proprietorship structures include part-time businesses, direct sellers, new start-ups, contractors, and consultants. The sole proprietorship is the simplest business form under which one can operate a business. 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