California Sole Proprietorships
Sole proprietorships are the simplest and most inexpensive business structures to operate in comparison to partnerships or corporations. In California, it is only necessary to file a fictitious name with the county clerk's office where the business is located and pay the necessary fees, which vary according to location. If a sole proprietor does business from a store or other commercial building, zoning permits and licensing fees may apply,
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Business Climate
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Sole proprietorships comprise the most common form of business in California. according to the state's official website (ca.gov). The state ranks number one in startups and new branches of high-tech manufacturing outlets. In 2010, California businesses received more than 47 percent of all venture capital awarded in the United States. The state ranks number one for risk capital and entrepreneurial infrastructure, and ranks number three for research and development. It also attracts more direct foreign investment than any other state.
Fees and Filing Paperwork
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Starting a sole proprietorship in California is as simple as the owner filing a fictitious business name with the county clerk's office where the business is located. There are no formation documents needed to be filed with California's secretary of state, as is the case with corporations. The costs to file fictitious names in California vary by county. As of the time of publication, it costs $40 to file a fictitious business name in Alameda County while it costs $23 in Orange County. Filing a fictitious name is all that is needed to start a sole proprietorship like freelance writing or consulting. However, owners of retail stores or companies operating out of commercial buildings also need to file for permits, meet zoning ordinances and pay the necessary fees.
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Taxation
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California sole proprietors have to file their business incomes on their individual 1040A tax forms. Besides paying income tax at the local, state and federal levels, sole proprietors also have to pay self-employment tax, which covers social security and Medicare. Sole proprietors pay estimated taxes quarterly throughout the year.
Liability
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Sole proprietors are in charge of all aspects of their businesses. This also means they are liable personally for any debts incurred by their businesses as well as any services and goods provided to customers. In the event that sole proprietors are sued in court or file for bankruptcy, the owners' homes, cars and other personal assets could be seized to pay off lawsuits or creditors.
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References
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