A sole proprietorship is a default type of business entity. This means that if you start doing business on your own (and not with other people), but don’t file any kind of paperwork with the state of Utah, your business entity will be automatically designated as a sole proprietorship. Put another way, if one individual starts a business and does nothing more than obtains a business license, they’re effectively operating their business as a sole proprietorship.
Pros of a Utah Sole Proprietorship
- Sole proprietorships can be formed without filing a document or paying a fee.
- Maintenance of a sole proprietorship (record keeping, legal formalities, etc.) requires minimal effort on the part of the owner.
- The owner generally owns 100% of the assets, takes home 100% of the profits, and has complete and total control of all managerial responsibilities.
Cons of a Utah Sole Proprietorship
- Sole Proprietorships do not offer limited liability protection. This means that the business owner could lose his/her personal assets (savings, home, etc.) if he/she loses a lawsuit or defaults on his/her debts and obligations.
- It’s difficult to raise capital or secure investors for a sole proprietorship.
- It’s difficult to pass on ownership of a sole proprietorship to a spouse, child, or other person in the event the owner dies or becomes incapacitated.
- It appears less professional than the other types of business entities, which can discourage people or other companies from doing business with you.
Utah Sole Proprietorship Checklist
- Business License. Even though you don’t have to file any documents in order to begin operating your business as a Utah sole proprietorship, you do need to obtain a business license from the county/counties where you will be conducting business.
- Business Name. If you are conducting business under a name different than your own (I.E. John Doe is operating a business called John’s Motors), you must register that business name with the secretary of state. Click here to read about registering a business name, or DBA. In Utah, the cost of registering a DBA is $22.
- Insurance. Because sole proprietorships do not offer limited liability like LLCs or Corporations, it’s a good idea to obtain insurance to cover whatever liabilities you may incur so you can adequately protect your own personal assets.
- Taxes. File a schedule C along with your individual tax return that includes the profits and losses from your business.