While you can form an LLC or a corporation of your own, you also have the option of just forming a sole proprietorship instead. It’s actually quite a popular business option, owing to the utter simplicity of the sole proprietorship formation process.
As the “sole” in the name indicates, you won’t have to deal with other partners in the business. You can just run the business as you see fit, and you don’t need to compromise with anyone.
There’s not much paperwork involved, and you’re not hobbled by too many red tape restrictions and yearly reporting requirements. You don’t really have to file any legal documents. You can quickly get your business off the ground and running.
The fees are very low (if there are even any fees involved). The taxation picture is also simple, since you and the business entity are basically the same—you just pay the taxes for the profits as your personal income.
Start with the Business Name
It’s true that you can simply use your own given name as the name of your business, especially as you and the business are basically one and the same. You can go with Joe Smith’s plumbing services if your name is Joe Smith, or Peter Johnson’s Furniture if you’re selling your handcrafted chairs and tables and your name is Peter Johnson.
You can also use an assumed name, especially if you’re hobbled by a rather unfortunate name like Adolf bin Laden. You can also use a business name or trade name as well, which may even become as popular as brand names like Microsoft, Amazon.com, or Starbucks.
But the law does require you to make sure that you don’t use a name that another business is officially using. Even if your surname is also McDonald, for example, you can’t use “McDonald’s” as your business name.
That means you first have to check through the Kentucky Secretary of State website, in which there’s a database of business names that’s already in use in the state of Kentucky.
Then you also have to check the US Patent & Trademark Office database in which businesses have registered their brand names to make other businesses unable to use their brand names. This is in effect in all states.
File Your Trade Name
Once you’ve confirmed that the trade name you’ve chosen for your business is unique and isn’t in use, then you can then use it. But if your business name is different from your actual legal name, then you’d have to register that new business name. Do this by going online to complete the Assumed Name Certificate.
Obtain All the Other Permits and Licences You May Need
The licenses you will need will depend a lot on the type of business you’re planning to run. You may be operating a business providing services for which you’d first have to obtain a professional license. For example, you better be licensed to practice law in the state of Kentucky if you’re planning on providing legal services in the state.
You can find out whether you need a license (and what type of license you’ll need) by checking out the Kentucky One Stop Business webpage. This is a fairly complete website that lists down every occupation and profession that requires a license for any sole proprietorship.
The list starts with the need for a license if you’re planning on working as an aircraft fuel distributor, all the way down to working as a whitewater river outfitter. If you’re running a driver training school, operating a cemetery, running a facility for mixed martial arts, or opening a salon, you’ll need a license.
Finally, you still need to check the local regulations in your town or city, and county as well. Your local area may have its own laws regarding business licenses for various professions. There may be business permits that you need to obtain, or zoning clearances you have to take into consideration.
Check with your local city and county governments to learn about these local regulations. In most cases, you can just go online. These city and county governments generally run a website displaying the information you’ll need. In Kentucky, each of the cities has different licensing requirements. For example, Bowling Green, Lexington, Paducah, and Louisville.
Get Your Employer Identification Number
You don’t really have to do this if you’re not planning on hiring any sort of employees for your sole proprietorship. Presumably, you already have your own Social Security number. You can use that SSN when you’re reporting taxes.
But it will still help if you get a separate EIN for your business anyway. It reduces the risk of identity theft. Some banks may also require a separate EIN for your business if you’re opening a bank account for your business. And getting your EIN for the business is an absolute must if you’re planning on hiring even a single employee for the sole proprietorship.
If you have employees, then you have to report and pay employment taxes on a regular basis. To do that, you will need the EIN.
Open A Separate Business Account
This is what you should do if you’re trying to separate your personal and business finances. A separate bank account gives you a clearer idea of how well your business is doing.
Get General Liability Insurance
One of the reasons why people go with an LLC or a corporation is that these business structures offer protection for the personal assets of the owners of the company. You don’t have this protection when you’re running a sole proprietorship, however. You and the business are one and the same, which means your business debts and business liabilities must be covered by your personal assets. Creditors can come after your personal bank account to cover your debts.
But you can still obtain some sort of financial protection with a general liability insurance plan. Usually, this insurance plan can cover you from claims that involve people getting hurt (or property getting damaged) as a result of your business operations, products, or services. The insurance may help cover medical expenses and the fees of the attorneys you hire to deal with these legal matters.
Pay Your Taxes
This isn’t just about paying taxes on the profits you make. You may have to deal with use tax and sales tax, depending on the business you’re running. You’ll need to register through the One-Stop portal with the Kentucky Department of Revenue to make sure you sign up and make payment of any tax that is related to your business.
That’s basically it. It’s fast and simple, and you can get your business running without too much hassle!