Indiana Sole Proprietorship

How to Become an Indiana Sole Proprietor

Becoming a sole proprietor in Indiana is simple. There’s no official setup process or fees. To operate an Indiana sole proprietorship, just start working. But even though it’s easy to start, there are some extra steps you might want to consider. While not necessary, many sole proprietors find them helpful.

DBA Acquisition

An Indiana doing business as (DBA) name is a crucial part of many sole proprietorships, as it enables you to use an assumed name for your business, rather than your own personal name. The advantages of acquiring a DBA start with image ― most customers feel that an assumed name is more professional and trustworthy than doing business with a company that uses its owner’s personal name instead.

That said, sole proprietors can sign up for a business bank account using their DBA name, which is another step that goes a long way toward making customers feel more comfortable doing business with you.

To claim a DBA in Indiana, you must simply file a Certificate of Assumed Business Name with the County Recorder of the county in which your sole proprietorship is located. This can be done either by completing the form as a PDF file and submitting it by mail to the Indiana Secretary of State, or you may choose to file it online using INBiz.

Determine Taxation Requirements

Sole proprietors without employees usually don’t need to acquire a federal tax ID number (EIN), because as a one-person business, you can typically just use your own social security number for most things an EIN is used for. Still, if you would rather not use your SSN for privacy purposes, it would be a good idea to get an EIN regardless.

Beyond that, the nature of your business will determine which taxes apply to you as a sole proprietor.

For example, if your sole proprietorship has employees, sells food, sells alcohol, or rents heavy equipment, you’ll be required to pay the appropriate responding tax. Depending on the nature of your business, these taxes or others may be applicable to your sole proprietorship. To establish your state-level tax requirements and register online to pay them, visit INTax, Indiana’s tax website.

Obtain Business Licenses and Permits

There isn’t a requirement in Indiana for sole proprietors to acquire a general business license, but depending on the nature of your business you may need other licenses and/or permits to operate in a compliant fashion.

These licenses are often industry-specific or occupational in nature, and are generally distributed by a range of state agencies.  In order to discover which state-level licenses and permits you need, you’ll want to consult the Licensing and Permitting section of Indiana’s Business Owner’s Guide. If you desire additional help with determining which licenses to obtain, the Indiana government recommends you contact the State Information Center at (317) 233-0800 to inquire about current requirements.

In addition, you should check to see if your business needs any licenses or permits on the local level.

Larger municipalities such as Bloomington, Indianapolis, Fort Wayne, and Evansville will likely have their own business license requirements.

What Is an Indiana Sole Proprietor?

As opposed to a corporation or Indiana limited liability company (LLC), the sole proprietorship is not a legal business entity. The sole proprietorship is a one-person business that is not considered to be a distinct entity from the person who owns it, and it is frequently operated using the owner’s personal name.

Here are the three main things you need to know:

Tax Responsibilities

Because there’s no distinction between the owner and the business itself, sole proprietors don’t need to file business tax returns ― they instead simply claim any business profits or losses on their personal tax returns.

Contracts

Sole proprietors are allowed to sign contracts using their personal name, and along those same lines, customers can write checks to the business by using the sole proprietor’s name.

More Flexible

The other big difference between sole proprietorships and more formal business structures is the fact that sole proprietors are allowed to commingle business and personal assets as much as they want to. With LLCs and corporations, ownership is required to keep their assets separate from those of the company. The downside of this aspect for sole proprietors is that if your business is sued, creditors are free to pursue your personal assets like your house, car, personal bank accounts, etc. For corporations and LLCs, creditors are limited to your business assets.