If you’re currently self-employed in the state of Nevada, or if you’re looking to enter the world of one-person business ownership, you’ve probably looked into becoming a sole proprietor.
The sole proprietorship is the simplest business ‘format’ in America, but that doesn’t mean that there aren’t rules and regulations to follow when you operate one. In addition, there are some limits to the functionality of a sole proprietorship.
In this guide, we’ll help you determine whether or not the sole proprietorship is a good choice for your business.
What Is a Nevada Sole Proprietor?
As opposed to a corporation or 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.
How to Become a Nevada Sole Proprietor
When it comes to being a sole proprietor in the state of Nevada, there is no formal setup process. There are also no fees involved with forming or maintaining this business type. If you want to operate a Nevada sole proprietorship, all you need to do is start working.
However, just because it’s so easy to get started doesn’t mean there aren’t some additional steps you should take along the way. While these parts of the process aren’t strictly required, many sole proprietors find that they are in their best interests.
A 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 acquire a DBA (sometimes referred to as a “fictitious business name” or “fictitious firm name”) in Nevada, you must first verify that the name you intend to use has not been previously claimed by another company. To do so, enter the name into the Nevada Business Search.
If the name is available, you may proceed with the acquisition process by filing the appropriate form. The document varies from county to county, and can be obtained from the respective office of the county clerk either digitally or in person. To contact your county’s clerk, you may find this directory compiled by the Nevada Secretary of State helpful.
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.
Although Nevada sole proprietorships are not subject to corporate income tax or personal income tax, there are other taxes you may need to pay depending on what goods or products are sold. For example, sole proprietorships which have employees and report gross wages to the Nevada Employment Security Division must pay a modified business tax (MBT).
To discover which state taxes your sole proprietorship is responsible, it’s recommended that you register online with the State of Nevada Taxation Department.
Obtain Business Licenses and Permits
There isn’t a requirement in Nevada 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.
In addition to your standard State Business License, your sole proprietorship may also require several industry-specific permits and licenses. To determine which licenses apply to your business, use Nevada’s New Business Checklist located here to determine both your state and local licensing needs.
In addition, you should check to see if your business needs any licenses or permits on the local level.
This can be done by visiting Nevada’s New Business checklist located here. Alternatively, to discover which local licensing requirements your sole proprietorship may be subject to, you may select your company’s location from this list and go from there.
While the sole proprietor is such a simple business classification that Nevada doesn’t even require a business registration process or any type of fees, depending on how you use your sole proprietorship and what industry you operate in, you still might have some important steps that need to be taken.
When it comes to issues of taxation, licenses and permits, or even the name you want to call your sole proprietorship, you do need to be vigilant to make sure you’re not overlooking anything.
We hope this guide helped you answer any questions you had for sole proprietorships in Nevada, and we wish you success with your business!