Wisconsin Sole Proprietorship

How to Become a Wisconsin Sole Proprietor

Becoming a sole proprietor in Wisconsin is simple. You don’t have to go through any official setup process or pay any fees. To start operating as a sole proprietor in Wisconsin, just start working.

Even though it’s easy to begin, there are some extra steps you might want to consider. While these steps aren’t necessary, many sole proprietors find them helpful.

DBA Acquisition

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. The advantages of acquiring a DBA start with image ― most customers feel that an assumed name is more professional and trustworthy than doing business with a company that uses its owner’s personal name instead.

That said, sole proprietors can sign up for a business bank account using their DBA name, which is another step that goes a long way toward making customers feel more comfortable doing business with you.

In Wisconsin, DBAs are generally referred to as “trade names.” To claim a trade name for your business, you must register it with the State Department of Financial Institutions by filing a Trade Name Application.

Determine Taxation Requirements

Sole proprietors without employees usually don’t need to acquire a federal tax ID number (EIN), because as a one-person business, you can typically just use your own social security number for most things an EIN is used for. Still, if you would rather not use your SSN for privacy purposes, it would be a good idea to get an EIN regardless.

Beyond that, the nature of your business will determine which taxes apply to you as a sole proprietor.

Depending on the nature of your business and its specific activities, you might be required to report sales and use tax. Information on these taxes (and many others) as well as how to register for them can be found on the Wisconsin Department of Revenue website.

If your sole proprietorship has employees, you’ll be required to periodically report and pay employment taxes. More information on employee taxes and how to register for them can be found on the Wisconsin Department of Workforce Development website.

Obtain Business Licenses and Permits

There isn’t a requirement in Wisconsin for sole proprietors to acquire a general business license, but depending on the nature of your business you may need other licenses and/or permits to operate in a compliant fashion.

Though some Wisconsin businesses will not need any state-issued licensing, others may require several. The best way to find out your sole proprietorship’s licensing requirements is through the state’s One Stop Business Portal. The One Stop system helps business owners at every stage of the formation process, including helping determine which licenses and permits apply to you.

In addition, you should check to see if your business needs any licenses or permits on the local level.

For example, Appleton, Green Bay, and Madison all have their own individual business licenses that may apply to your sole proprietorship.

What Is a Wisconsin Sole Proprietor?

As opposed to a corporation or limited liability company (LLC), the sole proprietorship is not a legal business entity. The sole proprietorship is a one-person business that is not considered to be a distinct entity from the person who owns it, and it is frequently operated using the owner’s personal name.

Here are the three main things you need to know:

Tax Responsibilities

Because there’s no distinction between the owner and the business itself, sole proprietors don’t need to file business tax returns ― they instead simply claim any business profits or losses on their personal tax returns.

Contracts

Sole proprietors are allowed to sign contracts using their personal name, and along those same lines, customers can write checks to the business by using the sole proprietor’s name.

More Flexible

The other big difference between sole proprietorships and more formal business structures is the fact that sole proprietors are allowed to commingle business and personal assets as much as they want to. With LLCs and corporations, ownership is required to keep their assets separate from those of the company. The downside of this aspect for sole proprietors is that if your business is sued, creditors are free to pursue your personal assets like your house, car, personal bank accounts, etc. For corporations and LLCs, creditors are limited to your business assets.