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 Colorado, a sole proprietorship is indeed the simplest business form and does not require formal registration with the state to be established. As a sole proprietor in Colorado, you are automatically considered as such by engaging in business activities without registering as any other form of business entity. However, you must comply with all relevant licensing, permit, and tax requirements. This includes obtaining a trade name if you are doing business under a name other than your legal name, which must be registered with the Colorado Secretary of State. Additionally, you may need specific local licenses, depending on the nature of your business and your location. As a sole proprietor, you are personally liable for all debts and obligations of the business, and all profits are reported on your personal income tax return. It's important to maintain proper records and understand that your personal assets could be at risk if your business incurs debt or is sued.