United States — Business: Sole Proprietorship

Key facts

• You are automatically a sole proprietor if you do business without registering as another kind of entity.
• Business assets and liabilities are not separate from personal ones, so the owner can be held personally liable for business debts.
• A DBA (assumed business name) is optional, and a DBA plus an EIN allows you to open a business bank account.
• Sole proprietors report business income on their personal return and are not taxed as a separate entity.

Steps

1. Choosing a Business Name — While not required to formally register the business, sole proprietors may want to choose a business name that is different from their personal name and check for availability of the desired name in their state.
2. Obtaining Licenses and Permits — Sole proprietors may need to obtain licenses and permits from state and local governments to operate their business, but requirements vary by jurisdiction.
3. Tax Obligations — Sole proprietors report business income and expenses on their personal tax returns (Form 1040) and may need to make estimated tax payments throughout the year.