How to Start a Sole Proprietorship in Delaware

What is a sole proprietorship?

A sole proprietorship is an unincorporated business with one sole owner, hence the name. Many entrepreneurs started sole proprietorships before expanding them into LLCs or corporations. And it is ideal to start a business as a sole proprietorship because it does not require a lot of paperwork and capital. With that said, starting a sole proprietorship has lower risks financially when you start one. 

What qualifies your business as a sole proprietorship?

If you have a business idea and don’t want to incorporate it, you can qualify as a sole proprietor. As long as you are the sole owner of a small business, you can start operating as a sole proprietorship. Having more than one owner and shareholders means a business can no longer operate as a sole prop. Instead, you can file for a different structure. 

Who is it best for?

A sole proprietorship in Delaware is best for small businesses that want to start operating immediately without needing a large capital. Forming other types of business structures will take a lot more time and paperwork before you can start running it. Starting a sole proprietorship is still the best way to start a business, especially if you are a first-time small business owner who wants to test out the waters and see if your business can become successful. 

Assuming you already went through the brainstorming phase and already come up with an idea for a good business plan, all you need to do is use this article as your guide, and you will be able to run your own business in no time. 

How to start a sole proprietorship in Delaware

Setting up a sole proprietorship in Delaware is very easy. Once you have all the business aspects sorted out, you can start operating almost immediately. Here is a step-by-step guide that could help you start your sole prop:

Naming your business

Sole proprietors can use a business name or do business under a chosen business name.

A business name or trade name gives the owner of a sole proprietorship the opportunity to select a more appropriate name for their business. 

For example, if you are thinking about starting a hot sauce business, thinking of a name that represents your business is ideal from a marketing standpoint, compared to using your legal name. Instead of the business name being John Doe, you can use a fictitious name for your business and operate as “Flaming Hot Sauces.”

Using your own name

Using your legal name to operate your business requires less paperwork. You simply sell goods or services, and it is assumed that your business name and legal name are one and the same.

Setting up a DBA

If you want to refer to your business as a company name, you need to file a DBA, or doing business as, with the state.

Having a DBA has its advantages. It adds a layer of legitimacy to your business, making it appear more trustworthy in the eyes of potential customers, which can make your business more trustworthy.

Before you can go ahead and file for a DBA name, you need to check if the name is available. In the state of Delaware, two businesses cannot have the same name. All business names registered need to be unique. So if you have selected a name for your business, the best way to check for its availability is by searching the Delaware business database using this search tool. 

If you try searching for a name and no exact matches appear, that means the name is up for grabs. And you can move on to the next step, filing for a DBA or trade name.

Once you have a business name in mind, you can now file for a DBA at your local county clerk’s office. 

For more information on how to file for a DBA in Delaware, you can go to this website. The filing fee is $25, and you can get your DBA certificate in less than a week.   

How to Check if a Business Name is Taken

State licenses

Although you don’t need to register a sole proprietorship, some businesses need a business license and other permits to operate legally. Depending on the type of business, your incorporation might need to get special licenses. 

For example, some professions need a license before they can offer their services to customers, such as barbers, accountants, fishing coaches, and more. Other licenses you might need are liquor and tobacco licenses if you plan on selling them in your store. 

Luckily, you can get these requirements all in one place on Delaware’s One-Stop Website.

This website contains everything you need, from learning about starting a small business in the state to tax payments, legal protections, and licensing. 

Delaware taxes

If you have a sole proprietorship, you don’t need to file a separate income tax return. You can pay the taxes of your business under your personal tax return, but instead of a W-2 form that regular employees use to file their taxes, you can file using a self-employed business tax form, known as a Schedule C.

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