What Is a Sole Proprietorship? + Examples

To start a sole proprietorship, you generally have to launch your business. Depending on your business and local regulations, you may need to apply for a permit or license with your city, county, or state. If you plan to hire employees, you will need an employee identification number from the IRS. If you are going to sell taxable products, you will need to register with your state for a sales tax license. The owner of a sole proprietorship pays personal income tax on profits earned from the business.

There are over 23 million sole proprietorships currently operating in the United States, making it by far the most popular form of business entity. Even though the setup process for a sole proprietorship is simple, you may still need to secure certain permits and licenses to operate legally. These requirements will vary depending on your industry and location.

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What you may not realize is that many home-based businesses operate as sole proprietorships. Computer repair companies are often operated as sole proprietorships. Some business owners operate commercial shops, while others work from home. Some areas require all businesses to register their information with the city or county even if they are sole proprietorships, so be sure to understand your local laws. Additionally, you may be required to obtain a license to conduct certain types of business in your area. A photographer likely has business expenses for their travel and equipment, which they can deduct for their business on their own tax return.

A bookkeeper posts a company’s revenue, expenses and other financial data to an accounting system. This gives businesses owners accurate financial information concerning their business. The financial sole proprietorship examples near me information maintained by a bookkeeper is used to prepare a company’s tax returns. We weigh below the pros and cons of sole proprietorships so you can make the best decision for your business.

Pros to Setting Up a Sole Proprietorship

This structure allows a single individual to own and run a business, making it an ideal option for small business owners and freelancers who want full control over their operations. Here, we provide examples of sole proprietorship businesses to inspire aspiring entrepreneurs. Having a sole proprietorship DBA NY is a business owner who has control over every part of the company in New York. Forming a sole proprietorship is easy, as you can begin working under your name and pay your taxes by using your social security number. Sole proprietors are considered the same as their business, as the owner and business are considered to be the same thing.

  • A sole proprietorship often makes the most sense for a photography business in many cases because it is a low-risk business without a lot of liability.
  • Most small businesses start as sole proprietorships and evolve into different legal structures as time passes and the company grows.
  • As such, they are very popular among sole owners of businesses, individual self-contractors, and consultants.
  • To register your DBA (aka Assumed Name) in New York, you’ll need to submit a Certificate of Assumed Name with the County Clerk in each county where your business operates.
  • Read the New York sole proprietorship guide below or get an LLC with ZenBusiness today for $0 + state fee.

You have to be the sole member of the business to be classified as a sole proprietorship, and your business income will pass through to your individual tax returns. Sole proprietorships and limited liability companies (LLCs) are used for different purposes. An LLC is typically best for businesses with more liability potential and those that need to hire employees. An LLC also gives you more flexibility in how your business is taxed since you can elect to be taxed as a corporation.

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