How to Start a Business as a Sole Proprietor

Starting a business is an exciting endeavor. You get to do what you love and make money doing it, but it can also be very stressful. Even though there are many steps involved in starting up a business as a sole proprietor, with the right guidance and preparation you can be on your way to success in no time!

What is a sole proprietorship?

A sole proprietorship is a business owned by one person. It’s not a legal entity, so it doesn’t have its own legal identity. It also isn’t a corporation or partnership; those are both types of legal entities that can be formed with more than one owner.

A sole proprietorship doesn’t have any formal structure–you don’t need to file any paperwork with your state government or create an official business plan before starting your business as a sole proprietor! You just need to register your name with the local government (which we’ll talk about in step 3 below). In fact, if you start out with nothing more than an idea and some passion for what you want to do, then congratulations: You’re already halfway there!

Sole Proprietorship vs Business

A sole proprietorship is a business that’s owned by one person and not subject to corporate taxes. If you want to be your own boss and aren’t ready for the added responsibilities of being an employee, this is probably the best option for you.

A corporation is a separate legal entity from its owners; it has its own tax ID number and can sue or be sued in court (like when someone steals your idea).

A partnership occurs when two or more people agree to share ownership of a business together with each contributing money, labor or property toward its operation. Partnerships are not taxed separately from their owners’ income; instead, they pass through all profits/losses directly onto each owner’s personal tax return at year end so there are no additional fees paid by partners themselves–just one big headache shared among everyone involved!

Decide on a business name.

The first step to starting your business is to decide on a name. This is the most important part of forming your company, so you want it to be easy for people to remember and understand what kind of business you are in. You also want a unique name that no one else has claimed as their own, especially if they are already registered as a trademark or service mark with the United States Patent and Trademark Office (USPTO).

To make sure that your chosen moniker isn’t already taken by another company, use this USPTO search tool:

Get an EIN, or employer identification number.

An EIN, or employer identification number, is a nine-digit number that the IRS issues to businesses. You’ll need to get one if you plan on hiring employees or paying independent contractors.

An EIN is used when filing taxes and other business-related documents such as 1099s for freelancers who work for your company and W2s for employees of yours. It also helps establish your company’s identity with banks and other third parties that may deal with you in person or over the phone (like credit card processors).

File a DBA (Doing Business As) certificate with the local registrar.

Once you’ve chosen a name for your business, it’s time to file a DBA (Doing Business As) certificate with the local registrar. You can do this online at most states’ websites, or by picking up the phone and calling them directly.

Once registered, you’ll need to provide your name, address and other details such as your social security number or tax identification number if applicable. Some states may require proof of being in good standing with other agencies such as banks or credit unions before issuing their approval letters on behalf of those companies involved in providing financial services like loans or mortgages; so make sure that everything is up-to-date before submitting this information!

Obtain licenses and permits.

You’ll need to obtain a business license and permit from your state, county and city. The type of license or permit you need depends on the nature of your business and its operations. For example, if you’re starting an online retail store that will be selling products from home in order to avoid paying sales tax on those items, then you’ll want to apply for a resale certificate from each state where your products will be shipped.

In addition to licenses and permits, most sole proprietors will also need an EIN (employer identification number) from the IRS before they can open their doors for business. This is especially true if they plan on hiring employees at any point during their tenure as sole proprietorships because they must report wages paid out through 1099 forms every year when filing taxes with Uncle Sam at the end of April following each calendar year’s end date.

Open a bank account for your business.

To open a business checking account, you’ll need to bring the following documents to your bank:

  • A copy of your business license.
  • Your social security number.

You should also have an idea of how much money you’ll need for operating expenses and payroll, as well as any taxes that will be deducted from employee paychecks every month. If there are other people who will be helping with day-to-day operations (e.g., employees), make sure they have their own accounts at the same bank so that all financial transactions can be tracked easily and efficiently.

Create a contract or agreement between you and any partners in your business.

A contract is a legally binding agreement between two or more parties. A partnership agreement is a type of contract that specifies how your business will be run, who owns what, and how profits will be split among partners. You should have a lawyer review the agreement before signing it to ensure it’s fair and doesn’t give one party too much power over another.

Register with state and local government agencies that provide business licenses and permits, such as health and fire inspectors, zoning officials, etc.

You’ll need to register with state and local government agencies that provide business licenses and permits, such as health and fire inspectors, zoning officials, etc. You may also want to register your business name with the county clerk’s office in the county where you plan to do business.

Some states require sole proprietors to register their businesses as corporations or LLCs (limited liability companies). For example, if you plan on doing any interstate commerce–selling products across state lines or accepting orders from customers who live in other states–you will need an employer identification number (EIN) from the IRS before opening your doors for business.

If you want to start up your own business it can be done but there are many steps to take to ensure you are on the right path.

If you want to start up your own business it can be done but there are many steps to take to ensure you are on the right path.

  • Startup costs: You need to consider how much money is needed for startup costs such as office supplies, advertising and marketing materials, equipment purchases and other expenses that may arise during the first few months of operation.
  • Business plan: A business plan is an essential tool for any entrepreneur because it sets goals and determines strategies for achieving them. It also helps potential investors understand what kind of business they are investing in so they can decide whether or not they want their money used for this purpose (or another).
  • Marketing: Once again this depends on what type of product or service you’re offering but generally speaking you have two options when it comes down marketing – paid advertising/promotion which includes TV commercials radio spots billboards etc., versus word-of-mouth advertising where consumers recommend one another based upon personal experience rather than sales pitches by outside parties; do some research into which type will work best with your target audience before making any decisions though!


We hope this article has helped you understand how to start a business as a sole proprietor. The key takeaway is that you don’t need to be incorporated in order to run your own company. You can simply use your personal name as the legal entity and then set up an LLC later on if it makes sense for your situation. This method works well for many entrepreneurs who want the flexibility of being able to operate as either a corporation or an LLC depending on their needs at any given moment throughout their career trajectory–and then there are those who prefer sole proprietorship because it requires less paperwork!

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