Sole proprietorships offer simplicity and fewer formalities for new business owners, with benefits like no separate taxes. Remember, personal and business assets aren’t distinct, impacting liabilities and the need for proper licensing.
By Brad Nakase, Attorney
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Sometimes, novice business owners and accidental entrepreneurs launch a company without truly meaning to do so. This leads to sole proprietorships. Your business is considered legitimate the moment it generates income. A sole proprietorship doesn’t require state registration to get started. On the other hand, the company’s and the owner’s assets are not separate from one another. Therefore, debts and responsibilities incurred by the owner may be satisfied from his or her personal assets.
Among the typical benefits of being a sole proprietorship are:
The regular formalities and procedures that LLCs or corporations must comply with do not apply to sole proprietorships. There are no mandatory yearly meetings, no yearly reports to submit, no state fees to pay, etc. Even so, as an owner of a sole proprietorship, you might still require business permits and licenses, depending on the nature of your enterprise.
Unless you register a DBA (doing business as), your personal name will be used as your company name when you are a sole proprietor. Most banks need owners of sole proprietorships to have a DBA name in order to open an account. Additionally, using a DBA name may give prospective clients and suppliers the impression that your company is more trustworthy.
Your business’s registration needs may vary depending on where it is located and how it operates because state and municipal requirements differ. Nonetheless, in many municipal and state jurisdictions, businesses are required to register for sales and payroll taxes.
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