How to Form a Sole Proprietorship

Setting up a sole proprietorship takes minimal effort. It's also the simplest type of business to structure and operate.

Difficulty: Moderate

Instructions

Things You'll Need:

• SBA Licenses
• Accounting Services
• Banks
• Legal Services
• Computers
• Business Plan Software
• Personal Financial Software

1. Find out which local, state and federal licenses and permits you need. Obtain them by contacting the Small Business Administration (SBA).

2. Make sure that you have the right to use your chosen business name by checking with the office of deeds or the appropriate city office in your area. Call the SBA if you don't know which office to call. This way you can verify that the name has not already been taken.

3. Get a Fictitious Business Name Statement by registering the name of your business in the county where you do business.

4. Apply for an employer ID number with the IRS using Form SS-4.

5. Apply for a state ID number with the Department of Revenue in the state in which you are forming your sole proprietorship. You need to have this number if you pay wages to employees, pay excise tax or have a Keogh retirement plan.

6. Consider getting business insurance to protect your personal assets.

Tips & Warnings

• To protect your company name, register with state and federal agencies, and file with the county where you do business.
• You can also do a preliminary trademark check via the U.S. Patent and Trademark Office Web site at www.uspto.gov.
• Sole proprietors assume unlimited legal liability with no protection for personal assets if the business goes bankrupt.

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on 11/22/2005 Any time you work as an independent contractor, you've established a sole proprietorship. You usually don't need to get a business license etc. unless you are advertising and/or actively seeking other clients and customers.