A sole proprietorship is the simplest form of business. The prevalent characteristic of a sole proprietorship is that the owner is inseparable from the business. It is not a separate entity. Because they are the same entity, the owner of a sole proprietorship has complete control over the business and its operations, and is financially and legally responsible for all debts and legal actions against the business. Another facet of the “same entity” aspect is that taxes on a sole proprietorship are determined at the personal income tax rate of the owner. In other words, a sole proprietorship does not pay taxes separately from the owner.
A sole proprietor may do business with a trade name other than his or her legal name. Sometimes a sole proprietor is required to file a fictitious business name statement with a local government even if it is the same as his actual name for certain types of businesses or as a requirement to open a business banking account. Once your business is established, you must also get the necessary licenses and/or permits.