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Sole Propietorship

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Category : > Sole Proprietorship
Posted On : Tue Sep 01st,2009


1. What is the Sole proprietorship?

A sole proprietorship is a company with one owner that is not registered with the state as a limited liability company (LLC) or a corporation. In some states, a sole proprietorship is referred to as a DBA (doing business as), as in "José Smith, doing business as Smith Heating and Air Conditioning."

Establishing a sole proprietorship is cheap and relatively uncomplicated. You don't have to file any papers to set it up -- you create a sole proprietorship just by going into business. In other words, if you'll be the only owner of the business you're starting; your business will automatically be a sole proprietorship, unless you incorporate it or organize it as an LLC. Of course, you do have to get the same business licenses and permits as any other company that goes into the same business

2. Sole Proprietorship Taxed

Unlike a corporation, a sole proprietorship is not considered separate from its owner for tax purposes. This means the sole proprietorship itself does not pay income tax; instead, the owner reports business income or losses on his or her individual income tax return. Note that all business income is taxed to the owner in the year the business receives it, whether or not the owner removes the money from the business

3. Sole Proprietor & Business Debts

Legally, a sole proprietorship is inseparable from its owner -- the business and the owner are one and the same. As a result, the owner of a sole proprietorship is personally liable for the entire amount of any business-related obligations, such as debts or court judgments. This means that if you form a sole proprietorship, creditors of the business can come after your personal assets -- your house or your car, for example -- to collect what the business owes them.

A sole proprietor can be held personally liable for any business-related obligation. This means that if your business doesn't pay a supplier, defaults on a debt, or loses a lawsuit, the creditor can legally come after your house or other possessions.


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Comments (5)
Jenny Lara   wrote on : Wed May 05th,2010
I have this setup in mind to register a business name (sole-proprietorship) which will be my main business entity and to also register one (for starters) name which I'll use as the brand name. I'd like to use the main business as the one with all the operational capabilities and pay taxes as the business under that particular name while this additional name would only serve as a brand my customers would identify the products with. Kind of a company - parent company thing. Is this as simple as registering the two business names and then paying taxes as that parent company and using the brand name with all customer related transactions, advertising etc? Any advice is appreciated. I'm in New York btw
Reply :

You have the following options if are planning to register your business as a sole proprietor.

  • If registering as a sole proprietor then you will register it under your legal name
  • you can create a dba by using other than your personal name
  • If you do not want any one use this name then you can trade mark or service mark it
  • As a sole proprietor you can only pay taxes on personal level

Peter Boll   wrote on : Wed May 05th,2010
I know I have to report my income from business ventures to the IRS and the State. Let's say I set up a pure dotcom business in my home selling T-Shirts. If my home based dotcom becomes profitable will my business be subjected to city taxes?
Reply :

If you live in the state where the local taxes are applicable then yes you are subject to local taxes.

Angel   wrote on : Mon Mar 07th,2011
I need to know what I need to do to start a Sole Proprietorship with a fictitious name and what order to do it in, in Lancaster PA PLEASE
Reply :
Dear Angel:

Thanks for choosing for your business needs. To start  a Sole Proprietor you can either use the following link to apply for or can be called at 516.822.3100 to place an order over the phone.

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MIMI   wrote on : Fri May 18th,2012
So as an Sole Proprietor, i don't have to pay quartly tax? If i file my annual tax, will they have me pay all the tax i didn't pay during the year? Can i file for an dependent and get tax return as an Sole Proprietor even if i didn't pay tax? what if parents wanted to file 'dependent tax credit', how do i prove that they had paid me certain amount? How can i pay tax as an Sole Proprietor-if i wanted too?
Reply :
Dear Mimi:

Thanks for choosing for your business needs. Please see your answers below but recommend to check to your Accountant or Attorney before deciding.

  1. If you have profit then you are required to pay estimated taxes.
  2. Bottom line you have to pay taxes based on your income and will get get what you are legally entitled for.

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You can use the following link for answers in detail.

Tomislav Najdovski   wrote on : Tue Jan 21st,2014
I am a foreigner. I live in Europe. I don't have a US address, and I want to setup a sole proprietorship in the US and open a business account with the bank. I do have a SSN and a personal bank account. However the bank ask's me a for a US ID to verify address. How can I setup a business account in the US? Basicly what I want is to setup a business in the US without traveling to the US. Can it be all done remotly ? With power of attorney maybe?
Reply :
Foreigner wants to register corporation in USA without physical presence

Dear Tomislav Najdovski:

We can help you registering corporation in any fifty states of United States. Please let us know what state do you want to register your corporation? and as far as the bank account is concerned, you need to call to banks to find out their requirements to open a bank account for Non-US-Resident. You can also read the following article to know more about.

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