SOLE PROPRIETORSHIP

An informal business recognized by the law and is owned and managed by one person. For tax purposes, a husband and wife qualify as a sole proprietorship and for federal tax reporting, the business files taxes as part of the taxpayer’s personal tax return. There are no legal formalities to set up a sole proprietorship although there still are requirements for tax registration and other permit and licenses that might apply. A fictitious business name may be used and filed. The owner of a sole proprietorship is personally liable for all debts owed by the business which can be satisfied out of his or her personal property.