Starting a Business During the Pandemic
There are more than 23 million sole proprietorships in the United States. It is the most common business structure. Most businesses start as sole proprietorships because of its advantages over other business structures.
Advantages of Sole Proprietorship
A sole proprietorship is the simplest and most common form of business. Key advantages of starting a sole proprietorship are:
> It's easy to set up
> There are minimal paperwork and fees
How to start a sole proprietorship?
Do you need to register a sole proprietorship? Let us look at the four steps required to start a sole proprietorship in Pennsylvania.
1. Choose a Business Name
As a sole proprietor, you may use your own given name (e.g., Joe Greene) or a fictitious business name (Greene Plumbing).
What is DBA, and do you need a dba for a sole proprietorship?
If you are Joe Greene, you can do business as Joe Greene, sole proprietor.
Alternatively, you can choose to create a fictitious business (doing business as) name like “Greene Plumbing." This would allow you to use a business name other than "Joe Greene."
Do you have to register a sole proprietorship?
If Joe uses “Greene Plumbing” he must register it with the PA Department of State to be sure this name is not being used by another business. There is a $70 fee. Joe must also publish an advertisement in a newspaper and a legal publication. However, if Joe wants to use his given name then he doesn't need to register it.
Does a sole proprietor need a business license?
There is confusion between a business license and business registration (mentioned above). A business license is a federal permit for business activities that are regulated by a federal agency.
Regardless of the business structure, some businesses need a license to operate. It depends on the industry. For example, no license is required to cut grass. However, if Joe decides to apply pesticides, he will need a commercial pesticide applicator license from the Pennsylvania Department of Agriculture. You may want to check that with our business consultants at Duquesne University SBDC.
2. Get an Employer Identification Number (EIN)
As a sole proprietor, you don't have to get an Employer Identification Number. You can do business using your Social Security Number (SSN). But there are two reasons to get an EIN. First, if Joe hires employees, he must have an EIN. Second, banks usually require an EIN to open a business bank account. EINs can be obtained from the IRS online at no cost. Learn more about getting an EIN here.
3. Open a Business Bank Account
Whether you are an LLC or a sole proprietor, it is vital to separate your personal and business account. This would not only help you to build business credit but also help you to stay legally compliant and protected.
Once Joe completes these four steps, Mean Greene Landscaping will be in business as a sole proprietor.
Examples of Sole Proprietors
As mentioned above, the sole proprietorship is the most popular form of business. That said most local businesses are sole proprietors.
Typical examples of sole proprietors are:
However, one key disadvantage of operating as a sole proprietorship is that the owners are personally responsible for any business debt, including lawsuits and other business obligations.
You may want to avoid starting as a sole proprietorship:
Let Us Know When You are Ready
Our consultants at the Duquesne University SBDC can walk you through all of the steps to establish a sole proprietorship and start your new business. Contact us for help today!
The Duquesne University SBDC provides free business consulting for entrepreneurs in the Greater Pittsburgh area. Click here to request no-cost, one-on-one consulting for additional help and information.
Don Lodge is a Business Consultant at the Duquesne University Small Business Development Center (DUSBDC). He is also a certified business coach who has worked with over 100 small business clients since 2002. His areas of expertise include profitability improvement, effective sales techniques, and employee relations.
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