Start a Sole Proprietor Business
A sole proprietorship is the easiest type of business to form when compared to the process for corporations and LLCs. The day you make your first sale or perform your first service, you're basically in business as a sole proprietor. Sole proprietors are able to claim business losses and gains on their individual or joint tax returns. A major drawback for sole proprietors is the lack of liability protection. Business creditors may pursue a sole proprietor's personal assets in order to recover business debts.
Instructions
Starting a Sole Proprietor Business
1. Register your business name. This can be accomplished by visiting the government agency in your state. In most cases, you'll be able to register your sole proprietorship at your secretary of state's office. You may elect to operate your sole proprietorship under your name, or you may select a "doing business as" name. Before deciding on a name for your sole proprietorship, you may conduct a quick search on search engines like Google to ensure your name is not taken by another company in your state. Fees to register a sole proprietorship vary from state to state, but the costs are usually very small compared to other types of businesses.
2. Get the proper licenses and permits to operate your business. Some states and counties may require you to obtain a business license and permit to conduct business within the county or state. This can be achieved by visiting your county clerk's office or City Hall. If you have a home-based mail order business, you may not have to get a business license, depending on your state of operation. However, if you're operating a retail carpet and installation business, you'll almost certainly be required to have a business license and permit to run your business. Contact your local government agency or the Small Business Administration to find out what permits and licenses are necessary to operate your business.
3. Set up a business bank account. Establishing a separate account enables you to better track your company's transactions. In addition, it helps separate your personal income from your business funds. Furthermore, keeping accurate records of your business transactions will pay off dividends when tax season rolls around.
4. Apply for an EIN number. An EIN is an employer identification number. This can be done online at IRS.gov. This step may not be necessary if you don't plan to have employees in your business. However, it's probably a good idea to apply for an EIN number anyway, because it enables other businesses and the IRS to easily identify your business. In some instances, your vendors and suppliers may ask for an EIN number if they don't sell merchandise or goods to the general public.
