Business Entities at the State Level: Sole Proprietorship
Over the next few weeks, we are going to switch topics to focus on specific business entities at the state level. Please note that this is different than entities according to the IRS as previously discussed. The next few topics will deal with entities according to a respective state, most of the time these are entities registered with a Secretary of State’s office. Today’s blog will deal with sole proprietorships. We will discuss what they are, how they work, and who would benefit most from filing as a sole proprietor at the state level.
Anyone who doing business under their own name and working for themselves is already a sole proprietor. The only thing that really needs to be accomplished to legitimize the business is to apply for any required licenses (i.e doctor, barber, attorney). Sole proprietors are not required to do much record keeping (aside from those for tax purposes). At the state level, the sole proprietor is not subject to any state corporate tax and pays taxes at their state income tax rate (if applicable).
To qualify as a sole proprietor at the state level, there are normally only two basic requirements. 1) You work for yourself and 2) you’re working under your own name and not a DBA (we will discuss that in our next installment). However, there are drawbacks to being a sole practitioner in that there are no shields between business assets and personal assets. In the event of a lawsuit, everything is fair game.
If you have any other questions about whether filing as a sole proprietor is right for you, the professionals at The Center for Financial, Legal and Tax Planning are more than well-equipped to answer your questions. Please contact us at (618) 997-3436.