How to Start a Sole Proprietorship

Choosing the right business structure for your brand can affect the way it operates, the personal liability you’ll have as an owner, how you’ll handle business income and business expenses, and how you’ll pay federal taxes. If you’re one of the many business owners out there that wants to run a company solo, then a sole proprietorship should be considered.

Starting a sole proprietorship can be quite simple. In fact, it’s considered one of the easiest business entities to create. Although the specific steps needed to start this type of business varies by state, in most, these three steps are required to make it a legal entity.

Step 1: Name Your Sole Proprietorship

As a sole owner, you can name your business using your legal name. You can also include a description of your business activities. For example, if your name is Joe Smith and you plan to start a landscaping business, you can name the company “Joe Smith Landscaping” without registering your business name. However, if you prefer to call your business “Tree and Shrub Trimmers,” then you would need to apply for a “doing business as” (DBA) name.

Researching Business Names 

To determine name availability, you need to research business names. Searches can be conducted through your state’s Secretary of State website. Most include a searchable database. Try searching for as little of your chosen name as possible, as this will give you more results. We can also help you reserve a business name.

Registering Your Name and Securing a Domain

Once you’ve selected a name, you can register your DBA name. This can be done online through your local county. Fees will vary between states. Before doing this, though, it’s good to determine your business’s domain name as well. Most companies have at least some online presence outside of social media, and you don’t want to register a name and then discover it isn’t available to use for a website. If you haven’t already, secure your domain name. 

Trademarking Your Name

While going through the process of naming your business, you may wonder if you’ll need to trademark it. While not required, trademarking your name does provide additional protections that a DBA doesn’t. For example, someone else could register your name, causing confusion among your customers and forcing you to rebrand.

Here are some tips to avoid this:

• Select what you are trademarking and search the United States Patent and Trademark Office (USPTO) to see if it’s available.
• Complete and submit your online application.
• Continue the process by working with the attorney they assign to you.
• Receive approval or denial.
• If your trademark is approved, it will be for a defined period. You will need to maintain the registration.

The fees for registering a trademark vary depending on how you file and how many trademarks you need. You can find more information on filing fees on the USPTO website.

You can also apply to register a trademark at the state level. While federal registration of a trademark often comes with broader protections, which can help if you plan on doing business out of state, trademark registration is often easier and quicker at the state level. 

Applying for a DBA

To apply for a DBA, start by researching name restrictions and availability. In most states, these include:

• Avoiding false associations with other businesses or institutions.
• Avoiding words that describe activities illegal in that state.
• Avoiding words associated with regulated industries like banking.

Register for a DBA name with us. 

Step 2: File for an Employee Identification Number (EIN) if Necessary

For many sole proprietorships, obtaining an employer identification number (EIN) from the IRS isn’t necessary. You’re only required to get one if you hire employees or plan to open a retirement account. However, securing an EIN is a step you should consider.

If you plan on opening a business bank account to handle your business income, for instance, most banks prefer an EIN. Your EIN works as an identifier, much like a Social Security number.

If you do not have an EIN, you must use your Social Security number, which opens you up to potential fraud. Obtaining an EIN is also relatively simple. You can fill out the form through the IRS. This is a free service, and you’ll be able to use your EIN immediately. You can also apply for an EIN with us. 

Step 3: Obtain Any Necessary Business Licenses and Insurance

Obtaining proper licenses and insurance is a critical step in setting up any legal business entity. As a sole proprietorship with no liability protection, you have to make sure you’re doing business the right way and have insurance if the worst ever happens.

Business Licenses to Consider

Which business licenses you’ll need will vary largely on your business type, but some common ones include:

• General business license
• Food or alcohol
• Farming
• Retail
• Vending machines
• Environmental
• Insurance or real estate
• Personal services

Securing Business Insurance 

As a sole proprietor, you’ll want to make sure to have business insurance to protect yourself. Your state may also require specific types of insurance. Even if you don’t have employees and aren’t required to pay for things like workers’ compensation insurance, there may be insurance requirements for specific industries.

Unfortunately, there is no one place to check and find the full list of what you might need. There are not only federal and state licenses and permits to check on but also local licenses and permits. Once you’ve obtained everything, you’ll need to keep track of which ones expire and when.

Start Your Business Today!

With our streamlined business creation model, you can get your dream started. We can help you create a limited liability company (LLC) or a corporation. Our services can help you build your brand into the company you’ve always wanted. If you have a business idea that has the potential to become something big, then get started today!