How to Establish a Sole Proprietorship

Setting up a new business is exciting. However, it is important that you consider all the necessary components of setting up a business. One very important decision is deciding the structure of your new business. In this article, you learn how to establish a sole proprietorship

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• Business idea
• Business registration
• Business license

1. Go into business. It is just that simple. Establishing a sole proprietorship is one of the easiest business structures to set up, you simply legalize your business by getting a business license and registering your business.
2. Register your business. Registering your business as a sole proprietorship requires you to state on your general application to start a business that you are a sole proprietor. Pay the estimated tax fees and receive your business license. If your business has a name other than your given name, register your business name with the county you live in. By doing this, this gives you some legal rights regarding this name should another business want to use the same business name.
3. Pay taxes. After establishing your business as a sole proprietorship you must prepare to pay taxes on your business earned income, therefore setting up a good recordkeeping system from the start is necessary. If your business requires you to have employees, apply for an employer identification number from the IRS for tax reporting purposes.
4. Know your responsibilities. As a sole proprietor, you, and your business are one entity, therefore report all income on your personal income tax return. When paying your taxes you are responsible for withholding and paying all income taxes. This includes contributing to Social Security and Medicare, and paying estimated taxes on a quarterly basis.

Tips & Warnings

• You personally are responsible for all business debts to creditors.