When you start a business, you must decide on a legal structure – sole proprietorship, partnership, Limited Liability Company, corporation, cooperative association, or other.  The vast majority of small businesses start out as sole proprietorships. 

A sole proprietorship is an unincorporated business owned by one person, usually the individual who has day-to-day responsibility for running the business.  It is the easiest and least expensive form of ownership to organize, and is easily dissolved, if desired.  When the owner dies, the business ceases to exist with the assets and liabilities passing to the estate.  There are no administrative requirements for a sole proprietorship, other than obtaining appropriate licenses and registration of the trade name.  You can conduct business under your own name, or under a trade name. 

A trade name is a name assumed by the sole proprietor that does not include the last name of the individual proprietor or the first and last name of the individual proprietor when a license is required to conduct business.  The trade name may not include the word “company, “corporation”, “incorporated”, or any abbreviation of these words unless the owner of the trade name is a corporation, LLC, LLP, or other.  A sole proprietor may not engage in business using a trade name unless it is registered with the Secretary of State.  Registering the trade name establishes a public record from which the name of the owner of the business can be identified, and gives exclusive rights to that name in the state registered.  No other business may file a name that is the same as, or deceivingly similar, to any registered name. 

Sole proprietors own all the assets of the business and the profits generated by it.  They have unlimited liability and are legally responsible for all debt against the business.  In the eyes of the law and the pubic, you are one in the same with the business.  The owner’s business and personal assets are at risk as the business is often limited to using funds from personal savings or consumer loans.  Sole proprietors receive all income generated by the business to keep or reinvest.  Profits form the business flow-through directly to the owner’s personal tax return. 

A sole proprietorship can hire any number of employees.  Because the law makes no distinction between you, the sole proprietor, and the business, you are not considered an employee.  If you are the sole owner, your business will still be a sole proprietorship, and all your business income is treated as your personal income. 

As with any business decision that may affect your personal liability or tax situation, consult your attorney or other business advisor to determine which structure is best suited for your business.

Tags: small business, small business fargo, sole proprietorship, starting a business, starting a business in fargo

File under: Business, Business Banking, banking

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