A company that has one owner who controls and manages the business is known as a sole proprietorship. Despite not being a legitimate corporate structure, it is the simplest and most possible way for small business owners to operate their companies and to make an average of $45,000 to $50,000 annually.
It is simple to create and run, has low initial expenses, uses the right tax computations, and also gives you the right to all profits. It is imperative to note that the majority of the 31.7 million small firms in the US—roughly 23.04 million—are sole proprietorships. According to a UENI survey, more women are operating sole proprietorships.
The lone proprietor in Texas is permitted to use either their legal name or a trading name. According to state law, if you intend to use an assumed business name or trade name, it must be different from the name of another corporation that is currently on file.
This is because trademarks are protected by both common law and federal law, it is wise to choose a name that is not similar to that of another already established business. Search the following public databases to make sure your company name is available:
Texas Comptroller of Public Accounts
Texas mandates that you register an assumed business name with the clerk in the county where you intend to conduct business if you use a business name that differs from your legal name.
In Texas, this is a necessary prerequisite. You must complete an assumed name certificate, which is available from the county clerk’s office, and mail it to the county clerk at the address specified in the application in order to register your assumed business name. The filing fee is approximately $10, but it could be different.
Depending on the nature of your company’s operations, you may need to obtain a business license or a professional license. Texas has a thorough list of all professions and occupations that require a license for any sole proprietorship on its website.
A company can get this information by visiting Texas’s occupational licenses and permits page. Additionally, your firm may be subject to regional laws, such as licenses, zoning clearances, and building permits. For more details, you should contact the local and county governments.
An employer identification number (EIN) is required for sole proprietors who want to hire staff. The IRS has assigned a nine-digit number to use when filing taxes. The IRS requires all firms with employees to report pay using their EIN. Note that online registration for an EIN is available on the IRS website.
One of the things you can do after registering the sole proprietorship is to open a business account. You may complete your accounting and bookkeeping easily and also obtain a precise picture of the financial situation of your company.
You can deduct any losses incurred for tax reasons if you have a separate company account, which demonstrates to the IRS that your operation is not a side project. Activities in a business account enable you to develop a positive credit history, which is essential to later obtaining a loan.
A sole proprietorship carries a high level of personal liability, so you are required to get insurance in addition to defense. Consider purchasing liability, health, and property insurance.
Given that any driving done for business purposes is not covered by your personal auto insurance, you want to consider purchasing business auto insurance, which costs about $600-$1,000. Although the initial fees and investment may seem high, your assets will be protected.
You will submit and pay income tax using the schedule C on your form 1040 on all of your business profits if you are a lone owner because there is no separate tax filing required.