What is a Sole Proprietorship?

A sole proprietorship is one of the entity types which is used to register a business name. It is generally registered with the county clerk's office.

What are the characteristics of a sole proprietorship?

1. A sole proprietorship is registered to a single owner only.
2. It is the simplest way of doing business. There is no annual renewal of reports are required to maintain it.
3. A business owner is personally liable for any lawsuits and it does not give a legal protection to the personal assets like corporations and limited liability companies.
4. Some states require to meet the publication requirement to register a sole proprietorship. Most states do not release the business certificate until the evidence of the publication is not submitted.
5. An identifier is not allowed to use the end of the business name, like Inc. or L.L.C. Because, sole proprietorship files under the business owner's legal name.
6. Multiple persons can use the same name in the same state but different counties.
7. The Employer Identification Number is not required for a sole proprietorship to open a bank account. It is only required to hire an employee.
8. A business owner cannot draw a payroll and pay social security taxes on the entire income. Cap is applicable.
9. It is generally good for five to ten years, which depends on each state.
10. A third party registered agent service cannot be used to create a sole proprietorship.
11. A Non US Resident is not eligible to apply for a sole proprietorship registration.
12. A sole proprietorship business name searches in the county database instead of the state database in most states. Because, it is registered on a county level.
13. A sole proprietorship cannot convert from one structure to another and from one state to another state like the corporations or a limited liability company.