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As a sole proprietor, you begin business in your own name.
Depending on your location and business name you may be required to have a business license and file a fictitious name statement also known as a “doing business as” or DBA.
Income that you receive as a sole proprietor is taxed as an individual (no double taxation like a C-corporation).
See a CPA/tax consultant for tax ramifications of starting your business as a sole proprietor.
You may be required to have a business license if the city or locality in which you live requires it.
Fictitious Name Statement or “Doing Business As” (DBA)
A DBA is required if you plan on doing business “as someone else.” In other words, John Smith DBA “Achme Hardware.” The main requirement for having a DBA is if you will not have your surname in the title of your business or it is confusing who is the owner. John Smith’s Hardware does not require a DBA. Whereas, Smith & Jones Hardware would require a DBA.
See your local Assessor/Recorder/County Clerk for procedures or consult with a local attorney for help filing a DBA.
- Easy to start
- Simply tell people you are in business and begin accepting payments.
- Low initial start-up costs
- Business licenses and fictitious name statements can frequently be had for less than $100. Please see your local jurisdiction for actual costs.
- Unlimited Personal Liability
- All of your personal assets are at risk if someone files a lawsuit against you or if you borrow money and creditors demand it. If you have insurance, it is possible that the insurance company may deny the claim or the claim may exceed your policy limits.
- Limited Alienability
- Selling your business is difficult because you are your business (i.e. no shares to exchange as in a corporation or membership interests to devise as in a limited liability company or LLC).
- Limited Ways to Grow Your Business
- Because you are your business many investors and creditors are unwilling to invest or lend to a sole proprietor because they may not get a return on their investment (due to the lack of alienability of your ownership interest).
NOTICE: The information on this website does not constitute legal advice and you should not rely on any information without seeking the advice of a competent attorney licensed to practice in your jurisdiction. This web site is both a communication and/or solicitation as defined by California Rules of Professional Conduct, rule 1-400. For further information, please click here.