How to register a sole proprietorship
If you are considering starting a new business as a sole proprietorship, you are in the right place. This article will highlight and simplify the steps required to register a sole proprietorship business and how you can get started quickly and easily.
What is a sole proprietor?
A sole proprietorship is a business type owned, controlled and operated by one person who pays personal income taxes from the income generated from the business. As the name implies, a sole proprietor has no business partners. They bear the business’s gains and losses and file their taxes independently.
Globally, sole proprietorship businesses are not separate entities and are regarded as the easiest business model to start and operate.
Sole proprietorships are arguably the most common form of business because starting is easier than other business forms. Also, many entrepreneurs love sole proprietorship because it affords them the opportunity to be the sole decision-makers and reap the proceeds from the business revenue.
So how can you register a sole proprietorship business? We have a few steps below to ensure you properly register your sole proprietorship business efficiently.
Also, it is essential to understand the pros and cons of sole proprietorship before you kickstart your business. Check out this article on the advantages and disadvantages of sole proprietorship.
How to register a sole proprietorship
Wherever you are, registering a sole proprietorship does not have to be a complex process. In fact, you will get your business registered and kickstarted by following the simple steps below.
Choose a business name
Deciding on a business name is one of a new business’ exciting and less challenging processes. Your business name represents you, your vision, and the product or service you intend to render. The business name will represent your brand. Take your time to choose the right name for your business.
Register your business name
Every country has its unique business registration body. This business body regulates
Unless you plan to use your government name for your business, registering your business name and a DBA (Doing Business As) is essential.
Once a name has been chosen, the next step is registering the business with the appropriate state agency. The registration process varies by region. Some regions require a DBA registration, which allows the business to use a different name than the owner’s legal name. Other states require a business license or permit.
Acquire necessary permits and licenses
Depending on the nature of the sole proprietorship business, obtaining permits or licenses from the authorities may be necessary — state or local. For instance, a food business will require a health permit, while a construction business will need a building/construction permit. Researching the requirements for your sole proprietorship business and obtaining all necessary permits and licenses before kickstarting your business is crucial.
Get a tax identification number
All businesses globally must have a tax ID number in the country of operation. The tax ID number is also called an Employer Identification Number (EIN) in many places. The government authority uses the EIN to identify the business for tax purposes. Sole proprietors without employees may use their social security number as their tax ID. However, it is recommended to obtain an EIN to keep personal and business finances separate.
Insure your business
Business insurance protects the sole proprietorship business from financial loss in case of accidents or other unexpected events. Depending on the nature of the business, different types of insurance may be necessary. For example, a construction business may need liability insurance and workers’ compensation insurance, while a consulting company may only need professional liability insurance.
Registering a sole proprietorship requires careful planning and attention to legal requirements. You must also understand the pros and cons of a sole proprietorship. By choosing a unique business name, registering the business with the appropriate state agency, and complying with ongoing requirements, the business owner can ensure their business is legal and protected. It is essential to consult with a lawyer or accountant for guidance on legal and tax requirements specific to the business.
How can Skuad help?
Skuad is a global employment and payroll platform that enables organizations to hire full-time employees and contractors in over 160 countries without setting up subsidiaries or legal entities. Skuad’s platform also helps organizations onboard talent, manage payroll, and ensure compliance with country-specific employment laws and tax regulations.
In addition, we handle your entire employment lifecycle so that you can scale your business operations compliantly, with reduced efforts and a top-notch HR administration.
To know more about Skuad, book a demo today.