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How To Start A Louisiana Sole Proprietorship

How To Start A Louisiana Sole Proprietorship

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How To Start A Louisiana Sole Proprietorship

Deciding on your business structure is an important initial stage in starting your business. Sole proprietorships are a common choice in Louisiana, and significantly more small business owners choose this structure versus others. With 69.3% of the 490,138 small businesses setting up as a sole proprietorship, you may be even more interested in starting your business under this structure.1

To help you learn more, in this guide, you’ll learn what a sole proprietorship is, its pros and cons, and a step-by-step process to get your sole proprietorship up and running in Louisiana.

What is a Sole Proprietorship?

Besides sole proprietorships, some other common types of business structures include general partnerships, corporations, and Limited Liability Companies (LLCs). A sole proprietorship is unique in its simplicity and is simply a business owned and run by a single individual. Unlike a corporation or an LLC, it doesn’t have to be registered with the state of Louisiana and doesn’t exist separately from its owner. Let’s look at some of the pros and cons of the sole proprietorship.

Sole Proprietorship Advantages

Simplicity and ease of formation: There are no complex legal documents to file or state registration requirements to meet. You become a sole proprietor as soon as you start doing business.

Tax simplicity: In a sole proprietorship, business income and expenses are reported on your personal income tax return.

Control: As a sole proprietor, you have complete control over all decisions and operations. There’s no need to consult with shareholders or partners, allowing you to quickly adapt and make decisions that are best for your business.

Sole Proprietorship Disadvantages

While an easy-to-set-up sole proprietorship can seem appealing, it’s also essential to be aware of potential disadvantages:

Unlimited personal liability: As a sole proprietor, you are personally responsible for all business debts and obligations. This means your personal assets can be targeted to satisfy business liabilities.

Potential tax disadvantages: Depending on your circumstances, you may end up paying more in taxes as a sole proprietor than you would in another business structure.

Limited life: The business does not exist separately from the owner. Therefore, if the owner decides to stop the business or passes away, the business ceases to exist.

If you value liability protection, you may want to consider setting up an LLC instead. An LLC offers protection to the owner’s personal assets, making it a better choice than a sole proprietorship for businesses exposed to potential liabilities.

Related: How to form a Louisiana LLC

Steps to Start a Sole Proprietorship in Louisiana

In Louisiana, starting a sole proprietorship is relatively straightforward as it doesn’t require formal registration with the state. However, there are some things to take care of to ensure your business is legally compliant and set up for success.

Step 1: Come up with a Business Name

As a sole proprietor in Louisiana, you can operate your business under your full first and last name and not have to register. However, if you want to operate under a specific business name, you will need to register it. For example, if your name is Jane Doe and you provide home cleaning services, you could go by “Jane Doe” and not register or register the name “Jane’s Home Cleaning Service.”

Step 2: File the Trade Name Form

If you plan to operate under a business name, you’ll need to register your business name with the Parish Clerk of Court in the parish where your business is located by filing a Trade Name form.

Related: How to file a Louisiana Trade Name form

Step 3: Research Business License Requirements

While there isn’t a state business license in Louisiana, other required registrations may exist. These licenses and permits will apply regardless of your business structure. We’ve included a few common registrations below.

Depending on local rules and what your business does, a local business license may be required. Check with your local city officials or economic development office for more information.

In Louisiana, all businesses need to register for a Louisiana Tax Account Number. This process has been made easy by the state, as it allows you to register for your sales tax license, employer registration, and more in one place.

Certain professions in Louisiana require a professional license before providing services. These professions include physical therapists, interior designers, and massage therapists, among others.

Finally, many small businesses register for an Employer Identification Number (EIN) with the Internal Revenue Service (IRS). The EIN essentially serves as a Social Security Number for your business.

Related: What business licenses and permits are needed in Louisiana?

Wrapping Up

Starting a sole proprietorship in Louisiana is a practical option for many entrepreneurs because of its simplicity and ease. However, it comes with some risks that must be considered.

If you are in the process of starting your own business, understanding these factors is important in choosing the structure that is the best fit for you. And we’re here to help guide you through the process. Have you chosen to go with a sole proprietorship for your business in Louisiana? Or do you have any other questions related to starting a business? We’re here to help, so feel free to reach out in the comments below!

Sources

  1. Internal Revenue Service ↩︎

Author

  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

How To Start A Louisiana Sole Proprietorship

How To Start A Louisiana Sole Proprietorship

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