A business created before or after marriage is often a contentious issue which ends in litigation when filing for divorce.
The Law Offices of Edward Misleh, APC is a law firm that practices family law and clients in Northern California with services they need and deserve when filing for divorce. Call now our Lawyer Hotline. Call now 321-951-9164.
What is a sole proprietorship? How do I establish a sole proprietorship?
A sole proprietorship is the simplest and most common structure chosen to start a business. It is an unincorporated business owned and run by one individual with no distinction between the business and you, the owner. You are entitled to all profits and are responsible for all your business’s debts, losses and liabilities.
What is an independent contractor?
When you operate as an independent contractor, you are functioning as sole proprietors. Of course, this assumes that they have not formed another business entity. When you perform contractual work, work only for a commission, you are functioning as an independent contractor.
You 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.
You will need to obtain the necessary licenses and permits for your sole proprietorship. You do not have to register your sole proprietorship with the state of California. The benefit of not having to register your sole proprietorship is that it limits expenses and initial paperwork. Even though there are no state regulation, there are often local rules that require you to either register your business, obtain a business license, or to get a permit to function as a legitimate business. You will also have to obtain an employer identification number (EIN) if you have employees.
The major drawback to a sole proprietorship is that you are exposed to personal liability. You are personally liable for any and all business debts and obligations. This means that if your their business fails to pay a debt or is sued, the individual owner will be obligated for that debt. Operating as a sole proprietor exposes your home and personal property to a creditor’s claim – a chance you may not want to take, especially if you have other assets.
The Internal Revenue Service does not make a distinction between you as an individual and your sole proprietorship for tax purposes. This means that for tax purposes, you as the sole proprietor will report all income and losses from the business on your personal tax return (Form 1040 and Schedule C).
You must withhold and pay tax on your income and on the income of any employee. This sole proprietor must withhold taxes for contributions to Social Security, Medicare and pay estimated taxes throughout the year.
If you are operating your sole proprietorship under a name that is different from your own or a “nickname,” you must register that name as a business with your county. California Business and Professions Code section 17910 requires that every person who regularly transacts business for profit under a “fictitious business name” to:
- File a statement with the county in which the principal place of business is located and
- Publish a statement about operating under this fictitious name in a newspaper of general circulation in the county in which the business is located.
CALL NOW TO MAKE AN APPOINTMENT
For more information on business entities, click on on of the following links: