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.
Is a sole proprietorship right for you?
If you're in business for yourself and you haven't created a formal business structure, then chances are, you're already a sole proprietor–so make sure you understand the implications.
LiabilitySole 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.
TaxesA sole proprietor is responsible to report all business profits as personal income, and pay self-employment tax on those profits, to cover Social Security and Medicare.
Hard to Raise CapitalThere are no partners, shares, or membership interests in a sole proprietorship so it's generally difficult to attract investors without changing your business structure.
So you're open for business. What next?
A sole proprietorship is simple to start, but that doesn't mean you should let your guard down. A little preparation goes a long way.
If you're a sole proprietor, the legal name of your business is your own name. In most states, if you want to operate the business under a different name, you'll need to file for a DBA, "doing business as."
You may need state or local permits and/or licenses to legally operate your business. We can help you figure out the business licenses you need.
Limit your liability
As a sole proprietor, you'll be personally liable for your business's debts and other liabilities. You may want to consider operating as a limited liability company (LLC) instead, so you're better protected.
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