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A sole proprietorship is the fastest, easiest, and cheapest business structure to set up, requiring no time, effort, or money. You just start doing business, and your business is considered to be a sole proprietorship. With a sole proprietorship, you have complete control of all business decisions, and you report your income (and are taxed) as an individual taxpayer. Those are the benefits. These are the potential drawbacks:

 Unlimited personal liability: This one’s the biggie. Nothing separates you from your business, so you’re personally responsible whenever something bad happens. If your business fails or someone wins a lawsuit against your business, you can lose everything, including your home and personal possessions.

 Difficulty raising money to grow your business: You can’t sell stock in the business, and banks will be reluctant to loan you money.

 Increased burden of running the business: With total control comes total responsibility, which can leave you feeling the heat when problems arise.

As a sole proprietor, you’re not required to name the business after yourself. You can register your business under a doing business as (DBA) name. As a DBA, you gain no legal protection, but you appear to the world to be more of a business entity. See “Registering your business” later in this chapter for details.

However your business is structured, I encourage you to apply for an employer identification number (EIN). If you have employees, you must have an EIN to report and deposit employee payroll taxes. You don’t need to be an employer or corporation to obtain and use an EIN, however. You can use an EIN instead of your Social Security number when invoicing clients and customers and paying taxes, which can help protect you from identity theft. Some businesses may also feel more comfortable doing business with you if you have an EIN because it establishes you as a business owner instead of an employee. To apply for an EIN, visit https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online.