You may also need to get a business license, a tax registration, and other permits or certificates. Blueprint is an independent, advertising-supported comparison service focused on helping readers make smarter decisions. We receive compensation from the companies that advertise on Blueprint which may impact how and where products appear on this site. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impact any of the editorial content on Blueprint.
A sole proprietorship is a good start for a plumbing business because it allows the owner to build a brand without having to spend time and resources registering for a formal business structure. A sole proprietorship is a small, unincorporated business run by a single person. This business structure is easy to set up and doesn’t require much paperwork. The entity does not exist apart from the owner, so if you start one, then you can use your first and last names as your business name or adopt a doing-business-as (DBA) name.
More Real-World Sole Proprietorship Examples
Many sole proprietors pay self-employment taxes each quarter, as estimated tax payments. The amount is based on how much money the business is expected to make for that tax year, and the payments basically set aside money to avoid having to pay a large amount to the IRS at tax time. As noted above, there are certain distinctions between a sole proprietorship, a limited liability company, and a partnership. The chart below highlights some of the key differences between the three. For example, the debts of the sole proprietorship are also the debts of the owner. However, the profits of the sole proprietorship are also the profits of the owner, as all profits flow directly to the business owner.
New York has over a thousand licenses that may or may not apply to your sole proprietorship. A comprehensive list of the licenses and who they apply to can be found in the Licensing section of the New York State government’s website. An independent artist who sells their work to clients is an example of a sole proprietor. Many freelancers, artists, actors, writers and makers tend to function as sole proprietors.
What Is A Sole Proprietorship?
When you’re ready to start your business, you’ll want to use New York’s Business Express to determine which licenses and permits you’ll need. Using the system, you may enter details about your sole proprietorship and receive specific licensing instructions. A doing business as (DBA) name is a crucial part of many sole proprietorships, as it enables you to use an assumed name for your business, rather than your own personal name. If your business is sued, you’re personally liable for the business debts and obligations. On the other hand, if you form an LLC, your personal assets are protected if your business is sued.
It carries the lowest setup fees and requires very minimal paperwork. A sole proprietorship is a business entity where all liabilities and financial obligations pass to the single owner of the business. Those choosing a sole proprietorship are usually in low-liability career fields and seek the administrative ease and flexibility that comes with this type of entity.
How to start a small business: A step-by-step guide
Banks prefer to work with companies that have a track record and generally view those who are starting out with a small balance sheet as high-risk borrowers. In a lot of states, you aren’t required to register your sole proprietorship, so there are no fees at the state level. However, there may sole proprietorship examples near me be state business taxes you’re required to pay, so you may still have to register your business with the appropriate tax authority. Different than other forms of business incorporation, the sole proprietor is personally liable for any legal actions, judgments, or debts against the business.
For example, if you want to start a wedding planning business, the moment you begin doing business research, calling potential customers, or building your website, you’re operating as a Sole Proprietorship. Jane Haskins practiced law for 20 years, representing small businesses in startup, dissolution, business transactions and litigation. She has written hundreds of articles on legal, intellectual property and tax issues affecting small businesses. The law holds “organizations” responsible for the acts of its principals or employees. Otherwise, an individual can only be held responsible for the acts of another if he asked the other party to engage in the illegal act, or he participated with the other party in the act.