Learning about the simplest business structure and how to establish it.
Registration and Costs
A sole proprietorship is a business structure in which the business and the owner are considered the same entity. It costs $31 to register your sole prop online with the Department of Revenue and $50 if you register it by mail. However, you don’t have to file any forms with the state to set up a sole proprietorship in Indiana. Yet, you might need to take additional steps like obtaining permits or licenses. Sole proprietors might also choose to file a Doing Business As (DBA) certificate to formalize a business name.
Understanding the costs involved in running a sole proprietorship is essential:
- Online registration: $31
- Mail registration: $50
- DBA registration: $10 to $100
- Forming an LLC: $100 to $800 (alternative option)
Legal Requirements and Steps to Registration
To register a sole proprietorship in Indiana, the following steps should be considered:
- Determine the business name.
- Obtain trade license if necessary.
- Register for sales tax and other relevant taxes with the Indiana Department of Revenue if required.
- Open a business bank account.
Do note that Indiana does not require a general business license for a sole proprietor to operate a business. However, depending on your business activities, you may need an occupational or professional license.
Taxation of a Sole Proprietorship
As a sole proprietor, all the business income goes directly to you, but you are also responsible for any debts, losses, or liabilities. Your business income and expenses are reported on your personal tax return. You’ll pay federal and state income tax on your business profits, and you’ll also pay self-employment taxes.
It is crucial to ensure proper registration and compliance with the regulations to avoid any liabilities. A word of caution: Always be aware of the legal and tax obligations that come with running a business as a sole proprietor in Indiana.