Sole Proprietorship

 You've gone into business for yourself. But that doesn't mean you're all alone.
 
  • You don't need to file paperwork to start a sole proprietorship.
  • But there are some things you may want to consider to get the most out of your business.

Sole proprietors are personally liable for the debts of their business. If the business is sued, your house, savings, and other personal assets are at risk. A sole proprietor is responsible to report all business profits as personal income, and pay self-employment tax on those profits, to cover Social Security. There are no partners, shares, or membership interests in a sole proprietorship so it's generally difficult to attract investors without changing your business structure.
 

Frequently Asked Questions:

Do I need to use my own name for my sole proprietorship, or can I run the business under another name?
As a sole proprietor, by default, the legal name of your business is your own name. But you can choose operate the business under another name, known as a "fictitious business name".
Do I need to register my sole proprietorship with the government?
You don't have to register or file any paperwork with the government to form a sole proprietorship. If you go into business without setting up another business structure and if you're the sole owner, then you're automatically considered a sole proprietor.
Can I open a business bank account with a sole proprietorship?

Even if your business is a sole proprietorship, you should have a separate business bank account to help separate your business and personal income and expenses. This will help you properly report your business income on your personal tax returns. Most banks will allow you to open an account for your sole proprietorship using your social security number.

If my business grows, can I change my sole proprietorship into a corporation or LLC?
You can always choose to restructure your business. Whenever you decide your business might be outgrowing its status as a sole proprietorship–whether you're looking to take on partners or investors, or you want the benefit of different tax options and liability protection–we have resources to help you find the business structure that's right for you.

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