A sole proprietorship is the simplest and most common structure chosen to start a business. It is an unincorporated business owned and run by one individual with no distinction between the business and you, the owner. You are entitled to all profits and are responsible for all your business’s debts, losses and liabilities.

You do not have to take any formal action to form a sole proprietorship. As long as you are the only owner, this status automatically comes from your business activities. In fact, you may already own one without knowing it. If you are a freelance writer, for example, you are a sole proprietor. But like all businesses, you need to obtain the necessary licenses and permits. Regulations vary by industry, state, and locality.

In California, a sole proprietorship is indeed the simplest business structure and does not require formal registration with the state to be established. As a sole proprietor, you are the sole owner and are personally responsible for all profits, debts, losses, and liabilities associated with your business. This means there is no legal distinction between you and your business. While no specific action is required to form a sole proprietorship, you must comply with all relevant licensing and permit requirements, which vary depending on the type of business, location, and industry. For instance, you may need a business license from your local city or county, and if you use a business name that is different from your own name, you must file a Fictitious Business Name Statement with the county where your business is located. Additionally, you are responsible for maintaining proper tax filings, including state and federal income taxes, and you may need to register for state taxes such as sales tax or payroll taxes if you have employees.