Sole Proprietor or "Doing Business As"

As a sole proprietor, you begin a business in your name.

Depending on your location and business name, you may be required to have a business license and file a fictitious business name statement, also known as a “doing business as” or DBA.

Tax Consequences

The income you receive as a sole proprietor is taxed as an individual (no double taxation like a corporation).

See a CPA/tax consultant for the tax ramifications of starting your business as a sole proprietor.

Business License

You may be required to have a business license if the city or locality in which you live requires it.

Fictitious Name Statement or "Doing Business As" (DBA)

A DBA is required if you plan on doing business “as someone else.”  In other words, John Smith DBA “Achme Hardware.”  The main requirement for having a DBA is if you will not have your surname in the title of your business or it is confusing who is the owner.  John Smith’s Hardware does not require a DBA.  Whereas, Smith & Jones Hardware would require a DBA.

See your local Assessor/Recorder/County Clerk for procedures or consult with a local attorney for help filing a DBA.

Sole Proprietor

Easy to Start
Easy to Operate
Hard to Transfer
Unlimited Liability

Pros

  • Easy to start
    • Tell people you are in business and begin accepting payments.
  • Low initial start-up costs
    • Business licenses and fictitious name statements can frequently be had for less than $100. Please see your local jurisdiction for actual costs.

Cons

  • Unlimited Personal Liability
    • All of your assets are at risk if someone files a lawsuit against you or if you borrow money and creditors demand it. If you have insurance, the insurance company may deny the claim, or the claim may exceed your policy limits.
  • Limited Alienability
    • Selling your business is difficult because you are your business (i.e., no shares to exchange as in a corporation).
  • Limited Ways to Grow Your Business
    • Because you are your business, many investors and creditors are unwilling to invest or lend to a sole proprietor because they may not get a return on their investment (due to the lack of alienability of your ownership interest).

NOTICE: The information on this website does not constitute legal advice and you should not rely on any information without seeking the advice of a competent attorney licensed to practice in your jurisdiction. This web site is both a communication and/or solicitation as defined by California Rules of Professional Conduct, rule 1-400. For further information, please click here.

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Think Legal, P.C. represents clients throughout California and the San Diego metropolitan area in issues of business entity formation, business planning, and personal injury. This includes the cities of San Diego, La Jolla, Del Mar, Carmel Valley, Oceanside, Solana Beach, Encinitas, Rancho Sante Fe, San Marcos, Mission Valley, El Cajon, Escondido, La Mesa, Poway, Coronado, Chula Vista, Vista, San Ysidro, Lakeside, Santee, Solana Beach, and National City. Attorney Taylor E. Darcy is responsible for this website.

NOTICE: The information on this website does not constitute legal advice and you should not rely on any information without seeking the advice of a competent attorney licensed to practice in your jurisdiction. This web site is both a communication and/or solicitation as defined by California Rules of Professional Conduct, rule 1-400. For further information, please click here.