Sole proprietorships are businesses owned and operated by one person and are the most common form of business entity due to their simplicity and ease of setup. However, they do not offer personal liability protection.
Required Documentation
To register a sole proprietorship, certain documents are required:
- Appropriate licensing for your business
- Permit for sales and use tax
- Registering your business name, if necessary
- Aadhar card and PAN card (in India)
- MSME registration, shop establishment license, etc.
Steps to Start a Sole Proprietorship
Starting a sole proprietorship can often be boiled down to seven key steps:
- Choosing a business name
- Registering your DBA
- Applying for an EIN number
- Acquiring any required licensing
- Producing necessary documents for registration
- Managing tax deductions and expenses
- Filing taxes with the correct forms
Tax Considerations
For tax purposes:
- File Form 1040, the individual tax return
- Schedule C reports business profit and loss
- Take advantage of pass-through taxation
- No need for a separate business tax return, report on personal T1 income tax return