Sole Proprietorship
A sole proprietorship is one person doing business in his or her own name (or under a fictitious name) and paying the applicable taxes on his or her personal income tax return. A sole proprietor has unlimited personal liability for the debts and obligations of the business, and cannot sell equity to fund operations or expand the business. As a sole proprietor, you can use debt to finance your operations, but you will be personally liable for the repayment.
A sole proprietorship is easy to set up and operate. There are no forms to file with the state, and therefore, no organizational expenses. However, if you are using a fictitious name for the business, a notice should be filed with the county or state in which you are doing business. There are no initial or continuing annual reports to file with the state, and there are no separate income tax forms to file—you simply file a Schedule C with your federal Form 1040 Individual Income Tax Return and applicable state income tax returns. You should keep accurate records of your business income and expenses and make sure to keep those business items separate from your personal expenses.
