Most Basic US Business Structure: Sole Proprietorship

Did you know you may already be considered the owner of a sole proprietorship business? This article covers some basic information regarding sole proprietorships in the USA.

What is a Sole Proprietorship?

A sole proprietorship is the simplest and most common business structure in the US. The IRS defines a sole proprietor as ”someone who own an unincorporated business by himself or herself.”

According to the SBA (Small Business Administration), those in the US, ”do not have to take any formal action to form a sole proprietorship. As long as you are the only owner, this status automatically comes from your business activities. In fact, you may already own one without knowing it.”

If you’re a US citizen who is teaching independently online without registering anything, the US government already recognizes you as a sole proprietor. Those of us who had contracts to teach with online ESL companies were also considered sole proprietors.

Independent contractors and sole proprietors are both self-employed. Therefore, being self-employed is synonymous to owning your own business. This is why many contracted online teachers were able to qualify for pandemic relief options such as the SBA grant and/or PPP loans (which are no longer available). Furthermore, there’s no legal distinction between yourself as an individual and a business.

Sole Proprietorship Taxes

According to the SBA, ”Because you and your business are one and the same, the business itself is not taxed separately-the sole proprietorship income is your income.” Typically, this means filing a Schedule C in addition to your normal tax forms. You can check IRS.gov for more information regarding sole proprietorship taxes and other forms.

If you have worked as an independent contractor with an online ESL company before, you’ve probably filed your taxes like this before. A couple of the benefits of maintaining a sole proprietorship is that it is so simple. Plus, it’s probably something you were already familiar with in regards to taxes if you’ve ever worked as an independent contractor.

Legal Business Name Under a Sole Proprietorship

If you have not done any formal business registration before, then the legal business name under your sole proprietorship is your personal name. Here is what LegalZoom has to say about it: ”As a sole proprietor, by default, the legal name of your business is your own name. But you can choose to operate the business under another name, known as a ‘fictitious business name’ or ‘doing business as’ (DBA). Most states require you to file an application for your DBA.” (Emphasis added)

Please Note:

The “legal name” of a sole proprietorship is your full legal name. This is especially important to remember when completing business related paperwork.

Why Does NihaoPay Require a Registration Certificate if I’m Already a Sole Proprietor?

Check out this article for more info: Business Registration Requirement for Using Chinese Payment Platforms

Business Registrations for a Sole Proprietorship

It’s possible to maintain a sole proprietorship structure when registering an EIN and/or a trade name. Check out these articles for more info:

• Free and Instant US Business Registration: EIN
• Inexpensive US Business Registration: Trade Name/DBA Name

Disclaimer – Any information contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues.  In addition, this article is not a substitute for a formal opinion; it is for informational purposes only. For more detailed information, readers may contact their local SBA office.