Sole Proprietorship: The Why, What and How
If you want something done right, you do it yourself. For some business owners, sharing their vision with a partner and opening it up for critique or revision is hard to do. Individuals who make the decision to go out on their own do so for a variety of reasons, including an overarching desire to control their own destiny.
What do we mean by that? A review of multiple websites on the topic of forming a sole proprietorship reveals that many people want to take on specific types of work in specific quantities. For work-aholics, this means taking on a lot of work and working a lot of hours. For others, it may mean achieving greater harmony with the work-life balance: not taking on as much work as required by the typical 9-to-5 job, and being able to spend more time on personal priorities such as family, education, health, or other creative endeavors.
Some folks choose to work for themselves because they believe they can do the job better than when they worked for another organization. Others really like having the customer as their only boss. And these days, due to economic idiosyncrasies, many creative and innovative people who gave their hearts and minds to a traditional employer now find themselves in the unemployment line and wondering if the time is finally right to pursue their lifelong dream of owning a business.
First Steps Towards Being Your Own Boss
One of the first decisions a new business owner must make is what their business name will be, which is always the most exciting part of the process. However, a second critical decision is to decide how to structure the business. A lot of people make the move to become a sole proprietor by using their established network to promote their new business under their own name. This lends itself to many first-time owners structuring the business as a Sole Proprietorship under the assumption that its is the fastest and easiest way to get started.
It’s true that forming as a Sole Proprietorship has several benefits, but there are risks associated with this type of business that can directly affect the business owner . The other, often overlooked, option for an individual is to form a Limited Liability Corporation (LLC), which can alleviate those risks.
We will delve more deeply into LLC’s in a later post, but for today’s post we focus on setting up your business as a Sole Proprietorship, discussing how to ease the process by registering your business. Next week, we’ll post our checklist of crucial items to be aware of as you set up your new business.
So You’ve Settled On Going Solo
When getting started, a new sole proprietor must decide whether to formally register the business. The majority of sole proprietors do not formally register, mainly because they opt to continue to work under their own name and receive payments into their personal checking accounts. The challenge with this approach is that tracking the financial separation between business expenses and personal expenses can quickly become muddy, making tax-time even more complicated than it already is. Individuals who are not planning to grow their business, or do not need additional layers of liability protection based on the nature of their work, are best suited for this.
On the other hand, one of the most compelling reasons to formally register a business is the ability to use a fictitious name known as a DBA, or "doing business as." Using a DBA provides you with a subtle layer of privacy between you as yourself and you as your business. A registered business also allows you to open separate bank accounts for tracking all income and expenses.
Ready To Own Your Own Business?
Registering as a Sole Proprietorship takes a lot of time and paperwork, but Archimedes C&C is here to help! We’ve provided a detailed checklist to guide you through the process and make sure no key steps are missed. Still feeling nervous? Archimedes will set everything up for you for a single flat fee. Contact us today to set up a free consultation and get the process started.