What do you need to do in order to effectively and efficiently run your sole proprietorship?
First step is to determine if you need a DBA (doing business as). A DBA allows your sole proprietorship to operate under a name other than your own name. This will be necessary in some states, especially if there is already a business operating under your name. Requirements vary from state to state. Check (site link) to determine what is required in your state. Also check your county and city to determine if any filings are necessary. Filing a DBA does not if you any increased protection for liability or risk – it just allows your business activities to be differentiated from someone else’s business activities that are happening under a similar name.
Second step is to obtain an EIN from the IRS. An EIN (Employer Identification Number) is an identification number from the IRS that is allows your business activities to be identified under another number rather than your social security number. You do not have to obtain an EIN, but it is wise to do so to further protect your own personal social security number.
[progressally_vimeo_video id=” vimeo_id=’265904804′ width=’900′ height=’500′]
This information is the same regardless of the state you file in. You will need a separate Employer Identification Number for your business this is its social security number and vital for getting bank accounts, PayPal, KDP and business accounts. Every business needs this to get set up. Watch the walkthrough video then open the link below in a new window so you can revisit the walkthrough video as you complete the process.
You should get an email from the IRS within a few hours with a PDF of the SS-4 form. Save this record we will be showing you where to save these files in the next module.
Third Step is to set up separate financial accounts for your sole proprietorship. Those accounts include bank account, credit card, PayPal or other cash movement accounts. These accounts will be used for only your business activities – income and expenses! No personal income or expenses should flow through these accounts. Imagine a wall between your personal financial activities and your business activities. They need to stay separate! Otherwise, you may pay too much or too little in taxes. To set up the bank account, you need:
- Your DBA filing (if necessary)
- Your SS-4 (from filing for your EIN number)
- Your Social Security number
- Your Date of Birth
- Proof of citizenship
- Your drivers license/identification
- Other bank requirements.
It is easier to set up a business account with your current banking institution.
How do I put money into my business account? Funding the account means putting your own money (earned outside of your author business and already taxed) into your sole proprietorship. This is your start up capital or Owners investment. It is not income just a personal investment into your sole proprietorship.
Connect your new business checking account to all author payment sites – Amazon, Itunes, Paypal, etc.
Fourth step is to determine if your county or city require a business license. This requirement varies greatly and is worth the time to investigate.
DBA example: John PT Smith, resides in xx state. There is one other John Smith doing business in his state using his name. In order to avoid confusion over which John Smith is doing what business activity, it might be in John PT Smith’s best interest to file a DBA with his county or city.
Module 2 Quiz