A sole proprietorship is easy to set up and is the simplest form of ownership. You can start doing business immediately. There are no filing requirements unless you plan to do business under a name other than your own. In that case, you must file a Fictitious (Assumed) Business Name statement with the county of your residence. As a sole proprietor, you are the only owner and ultimate decision maker for the business. If you will be operating on your own or plan to hire employees primarily to carry out your decisions, this may be the form for you.
From a tax and legal standpoint, you and your business are one entity. All revenue you earn in your business is considered income to you. Income, expenses and profits are reported on Schedule C and submitted with the 1040.
All expenses, debts and liabilities of the business are ultimately your personal responsibility. This is one of the risks of a sole proprietorship; there is no separation between you and the business. If someone sues the business or puts a claim against it or you don't pay your business bills on time, your assets will be directly at risk. Commercial insurance may offset some of the risk of a lawsuit, however, if the incident is outside what's normally covered by insurance, you will be held personally liable. Weigh the ease of setting up and running a sole proprietorship with the potential risk of personal liability.
You can sell your business at any time. However, selling a consulting business poses problems in that if you are the only developer, the business is not likely to survive without you. Since you and your business are one, when you die, so does your business. It will not survive you. The assets and liabilities will all be inherited by your heirs who will decide what to do with them.
| Sole Proprietorship | CALIFORNIA | ILLINOIS | MASSACHUSETTS |
| Initial State Filing Fees | N/A | N/A | N/A |
| Annual State Fees/Tax | N/A | N/A | N/A |
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