This checklist provides useful information for individuals that want to start a sole
proprietorship. Sole proprietorships are run by only one individual and there usually is
no distinction between the individual and the business. This useful guide provides a
checklist of important steps the individual should undertake during formation, these
steps include: checking the business name availability, registering fictitious business
names, registering for an employer identification number, opening bank accounts, and
hiring employees. This guide can be helpful to individuals that want to operate their
small business as a sole proprietorship and want to learn more about formation
requirements.
SOLE PROPRIETORSHIP FORMATION TO-DO AND INFORMATION CHECK LIST
Name Availability. Choose the name of your Sole Proprietorship and make sure it is
available. You should do research to see if the name is available by checking to see if any
corporations or LLC in your state have your proposed name. This can be accomplished by
visiting the website of the Secretary of State and using the business entity name search. In
addition you should research whether any partnerships or sole proprietorships have your name in
your county or in any surrounding counties. This can be accomplished by visiting each county’s
County Clerk website and using the Fictitious Business Name search; in some counties this can
also be called an Assumed Name, Doing Business As or D/B/A search. Additionally, you should
try searching the internet for your proposed name. If you have done the foregoing searches and
all looks good, and you plan to eventually obtain trademarks or service marks in your company
name, you should also check to make sure the trademark and/or service mark is available with
the United States Patent and Trademark Office (“USPTO”). A basic Trademark search can be
done on the USPTO’s website; however this search is fairly complicated and might not be
conclusive. You might consider talking to an attorney about performing this search for you.
State trademark and/or service mark searches should also be considered. You will also want to
consider checking to see if the domain name associated with your chosen business name is
available, as well as performing a search of local phone books and directories to see if any local
businesses are currently operating with the same or a similar name that did not appear in your
other search results.
o Why? If the name is taken, you will confuse your customers, and potentially have
legal issues with the other entity using the same name. In addition, if the Sole Proprietorship
(i.e., D/B/A) name is not available with your County Clerk, your paperwork will be denied and
you will have wasted your time with the paperwork and filing fee. If the trademark is not
available, if and when you eventually apply for trademark, your application will be rejected and
you will have wasted your time with the paperwork and the filing fee (which exceeds $300). The
same is true of your business’ potential domain name – you do not want to invest in setting up
your business and registering a trademark only to find that the valuable online domain name
presence your business needs is unavailable. A local search of business names will help to
assure that you are aware of any businesses operating with the same or a similar name that have
not taken the additional steps and filed the name with the Secretary of State or registered its
trademark. Just because another business has not registered its trademark does not mean that it
does not have legal rights to that name. Questions as to the legal rights to a business name
should be addressed to a legal professional.
o One-time or repetitive? These availability searches are a one-time task for each
potential name.
o Due Date? You should do this before you attempt to form your Sole Proprietorship.
o State Specific? The procedures for searching the state SOS database and the state
trademark/service mark database may differ from state to state.
o What Triggers? You have decided you would like to form a Sole Proprietorship.
Register Your Fictitious Business Name. You must file a Fictitious Business Name
Statement with your County Clerk, unless you are doing business using your surname. These
can also be called an Assumed Name filing or Doing Business As or d/b/a filing. These filing
forms can often be found at the County Clerk’s website for your county, for example, in Los
Angeles County the form is located at:
http://www.lavote.net/GENERAL/PDFS/FICTITIOUS_BUSINESS_NAME.pdf. In addition,
most counties require publication of the fictitious business name in a newspaper or other
publication.
o Why? It is required to register the Sole Proprietorship.
o One-time or repetitive? Generally this is a one-time task.
o Due Date? You should register prior to doing business under the assumed name. The
actual due date will vary county by county, for example in Los Angeles county; you must file no
later than 40 days after the business start date.
o State Specific? As indicated above, this is county specific; each county will have its
own requirements, filing fees and forms.
o What Triggers? Starting a Sole Proprietorship.
Employer Identification Number. Prepare, execute and submit to the IRS Form SS-4
(Application for Employer I.D. Number), this can be done on paper, printable at:
http://www.irs.gov/pub/irs-pdf/fss4.pdf, or can be applied for online at:
https://sa1.www4.irs.gov/modiein/individual/index.jsp.
o Why? The Employer Identification Number (“EIN”) is the Sole Proprietorship’s
Social Security Number (Social Security Numbers can only be issued to people; EINs are issued
to Sole Proprietorships). This number is necessary to open a Sole Proprietorship bank account
and also to make payments to employees.
o One-time or repetitive? Obtaining an EIN is a one-time task.
o Due Date? You should apply for an EIN promptly following formation of the Sole
Proprietorship.
o State Specific? EIN is issued by the Federal government and accordingly is not state
specific.
o What Triggers? The need to get a bank account and Federal identification number.
Open Sole Proprietorship Bank Account. Open a Sole Proprietorship bank account.
Remember to bring: your EIN and file stamped Fictitious Business Name Statement.
o Why? A Sole Proprietorship bank account is beneficial because it allows the Sole
Proprietorship to cash checks made out to the Sole Proprietorship and helps separate the
individual’s money from that of the Sole Proprietorship.
o One-time or repetitive? Opening a Sole Proprietorship bank account is a one-time
task.
o Due Date? The Sole Proprietorship bank account should be opened once you have an
EIN, Sole Proprietorship Agreement and file stamped Fictitious Business Name Statement.
o State Specific? No.
o What Triggers? Having the applicable paperwork.
Hiring Employees. Prior to hiring an employee, the Sole Proprietorship should execute an
employer-employee agreement and file appropriate paperwork with the appropriate state
authorities. If you would like a detailed and attorney reviewed sample employer-employee
agreement, a sample specific to your state can be purchased on docstoc.com. Regarding the state
paperwork, this can often be found online, for example, in California, Form DE1 should be
completed and filed with the Employment Development Department
(http://www.edd.ca.gov/pdf_pub_ctr/de1.pdf).
o Why? Employer-employee agreements are important to dictate each party’s rights
and responsibilities, benefits, termination issues and salary. Employer state paperwork is often
mandatory.
o One-time or repetitive? The employer-employee agreement is a one-time task,
though amendments may be required to extend the duration of employment or adjust other terms
of the agreement. The state paperwork will vary depending on what your particular state agency
requires.
o Due Date? The employer-employee agreement should be executed prior to
commencement of employment, the state paperwork due date will vary by state, but often will be
due immediately upon commencement of employment of first employee. In California, Form
DE1 is due within 15 days of paying an employee more than $100.
o State Specific? The employer-employee agreement may be state specific regarding
particular state law issues and provisions. The state paperwork will be state specific regarding
what form to use, what the filing fee is and when it is due.
o What Triggers? The hiring of an employee.
Hiring Independent Contractors. Prior to hiring an independent contractor, the Sole
Proprietorship should execute an independent contractor agreement and file appropriate
paperwork with the appropriate state authorities. If you would like a detailed and attorney
reviewed sample independent contractor agreement, a s