Sole Proprietorship FAQs

One advantage is no initial paperwork and no ongoing state formalities, such as annual reports. However, since CT can mitigate the paperwork involved for LLC, C and S Corporations, this isn’t a significant advantage. From a tax perspective, you avoid double taxation—all business income, profits, losses, and expenses are reported on your personal tax return. However, the same is true of LLCs and S Corporations—without the risks of personal liability you constantly risk as a sole proprietor.

Yes, most businesses need licensing and permits to operate—your business structure doesn’t change that. Additionally, you’ll want a business bank account to withstand scrutiny from IRS. To open one, many banks require a separate business name, which means you’ll need to file for “Doing Business As” (DBA) certificate.