There are several types of businesses that thrive in the business industry. Among them are partnerships, corporations, limited liability companies, and limited liability companies with limited liability. Sole proprietorships are also types of businesses.
This is the most common and straightforward form to start a business. Most small businesses fall under this type. It’s also the least expensive way to start a business. Follow this quick “start a sole proprietorship” guide and reap its benefits.
1. Choosing a business name: The first step is to come up with a business name. Think of a few different names that are unique and are able to describe your business succinctly. It is also possible to have your business name be the same as your personal name-we will discuss more in the next section of this article. You can start registering your business name once you have identified an available business name you like and have found an available one.
2. Domain name purchase: As soon as you’ve chosen a business name and registered it with your state, it’s time to purchase your website domain name. Your domain name identifies your website. An example might look like this: www.example.com. In order to avoid any confusion, make your domain name the same as your business name. If your preferred domain name isn’t available, you can come up with a variation that’s still similar to your business name. You don’t have to build your website right now if you’re not ready. If you want to ensure that no other business takes your domain, you can still reserve it.
3. Obtain an employer identification number (EIN): Most of the time, your Social Security number will serve as your tax ID number. You will, however, need an employer identification number (EIN) if you decide to hire employees or set up a retirement plan. You provide an EIN to the Internal Revenue Service (IRS) when you file your taxes. On the Small Business Administration’s website, you can obtain your EIN for free and easily.
4. Your business name should be registered: When it comes to naming their business, sole proprietors have two options. The name of your business can match your personal name or you can choose a different name. When you don’t want to use your own name for your business, you’ll need to use a fictitious name or “doing business as” name (DBA). Although DBAs aren’t required in most states, they come in handy if you want to open a business banking account or business credit card, as these institutions require you to separate your personal and business finances.
5. Permits and licenses for your business: Doing everything by the book and obtaining all the necessary business licenses and permits is crucial. Fines can be hefty if you do not have the appropriate licenses or permits. Depending on the nature of your business, as well as the state and local area in which you operate, you will need licenses and permits. Opening a daycare, for instance, requires health and safety training. If you want to prepare or serve food, you will need a permit from the health department.
6. Cover yourself with insurance: Having a sole proprietorship means you have unlimited liability if your business goes bankrupt or someone takes legal action against you. You can limit the risks by getting additional insurance coverage. Getting insurance may seem like a significant expense. If you come across an unfavorable situation, you’ll be protecting your personal assets.
7. Obtain a business bank account: In spite of the fact that the revenue from your business is directly transferred to your personal income, it is recommended that you separate your business expenses from your personal expenses. The benefits of having a business account include the ability to accept credit card payments and written checks, as well as providing you with the ability to build a credit history for your business. You can also show your IRS profits and losses clearly if you have a separate business account.
You’ll discover that starting a sole proprietorship is an affordable and relatively easy way to launch your own business. The entry barrier is low and it allows you to be your own boss. The downside is that it can expose you to unlimited liability, which may pose some risks. Make sure a sole proprietorship is the right business structure for you. Follow this “start a sole proprietorship” guide and prosper in your line of work.
