Sole Proprietorship Formation

Easy to establish and easy to run, sole proprietorships are also the riskiest type of business: You enjoy simplicity and control, but you’re completely liable for the business and its employees, with limited tax options.

Low Effort, High Risk: Benefits and Drawbacks

If you’re doing business without incorporating, then by default, you’re a sole proprietorship: Your business is not its own legal entity. There’s no setup process, but there’s also no personal asset protection—your home, savings, etc. are susceptible to creditors. There’s less paperwork, but there’s still filing to do. You don’t share control, but you also can’t bring on a partner.

CT Can Help You Plan a Course of Action By:

  • Unraveling your business structure options, including LLCs, S-Corporations, and C-Corporations so you can make an informed decision
  • Discussing lawsuit potential—many people think having business insurance is enough, but oftentimes, it’s not
  • Taking you through licensing, which is required regardless of your structure
  • Assisting you with tax-related items, such as your employer ID number (EIN) and whether you’re subject to a self-employment tax
  • Helping you secure a “Doing Business As” (DBA) name in order to make fundamental transactions like opening a bank account

Sole Proprietor FAQs

Are there any advantages to operating as a sole proprietor?

One advantage is no initial paperwork and no ongoing state formalities, such as annual reports. However, since CT can mitigate the paperwork involved for LLC, C and S Corporations, this isn’t a significant advantage. From a tax perspective, you avoid double taxation—all business income, profits, losses, and expenses are reported on your personal tax return. However, the same is true of LLCs and S Corporations—without the risks of personal liability you constantly risk as a sole proprietor.

Are there any requirements imposed on sole proprietors?

Yes, most businesses need licensing and permits to operate—your business structure doesn’t change that. Additionally, you’ll want a business bank account to withstand scrutiny from IRS. To open one, many banks require a separate business name, which means you’ll need to file for “Doing Business As” (DBA) certificate.

Request a Custom Quote

Have a specific question about a product? A CT Specialist will follow up with a custom quote along with a comprehensive assessment of your needs.