Starting your first business is a significant milestone, and one of the initial decisions you’ll face is choosing the right business structure. A business structure defines how your business is organized and operates, impacting everything from your day-to-day operations to how you file your taxes.
In this guide, you’ll learn about the sole proprietorship – what it is, its advantages and disadvantages, and a step-by-step guide on how to register one in Nevada.
Related: Nevada Business Startup Checklist
What is a sole proprietorship?
A sole proprietorship is a simple and common business structure and is an appealing choice for small business owners in Nevada. Other types of business structures, such as general partnerships, involve multiple owners sharing profits, losses, and liabilities. Corporations are separate legal entities from their owners, while Limited Liability Companies (LLCs) combine aspects of sole proprietorships and corporations.
Sole Proprietorship Advantages
- Lowest startup costs: The sole proprietorship is the most affordable option for new businesses, with minimal registration and operational expenses.
- Taxation: The earnings of your Nevada sole proprietorship flow directly to your personal tax return, simplifying the tax process and avoiding the double taxation that corporations can face.
- Ease of setup: You can establish a sole proprietorship instantly just by starting to operate your business. No formal business registration is required in Nevada to create a sole proprietorship.
Sole Proprietorship Disadvantages
- Unlimited personal liability: In Nevada, sole proprietors are personally responsible for all business debts and obligations. This means personal assets like your car or home could be at risk.
- Difficulty raising capital: Sole proprietorships have fewer funding options, as you cannot sell shares of your business like in a corporation or Limited Liability Company.
- Less credibility with some customers and vendors: Sometimes, sole proprietorships are perceived as less established, which can impact potential business relationships.
If protecting personal assets is a priority, forming an LLC in Nevada might be a better choice. An LLC offers liability protection, separating personal assets from business debts. This structure is particularly beneficial for businesses with higher risk or those looking to raise capital more effectively.
Related: How To Form A Nevada LLC
Steps to Start a Sole Proprietorship in Nevada
Starting a sole proprietorship in Nevada is a straightforward business formation process, as it does not require filing any legal documents with the state government to legally create the business entity. However, there are a few steps to cover so the business is legally set up.
Step 1: Choose a Business Name
As a sole proprietor in Nevada, the owner can operate their business under either their full first or last name. However, registration is required if they want to operate under a specific business name.
For example, Jane Smith is starting a graphic design business in Las Vegas. Instead of operating under her full name, Jane Smith, she’d like to operate as “JS Designs.” In this case, she’ll need to register the DBA name “JS Designs” in each Nevada county where she plans to operate.
Step 2: Verify Name Availability
One of the requirements for registering a business name in Nevada is that each business operating in a county has a unique name. To research, search the county name database in each county where the business will operate to make sure the name is available. Most counties offer an online name search database, but some will require a visit in person.
Step 3: File the Fictitious Firm Name Form
Registering requirements apply if you plan to operate under a unique business name. Navigate the process by getting a Fictitious Firm Name (FFN) form from each county where the business will operate. The forms must be notarized.
Registering a Nevada assumed name won’t guarantee that no other business will use the name. For stronger ownership of your name, consider applying for a federal trademark via the U.S. Patent & Trademark Office (USPTO).
Related: How To File A Nevada Fictitious Name Form
Step 4: Obtain Required Licenses
In addition to setting up the business structure and naming, there are business licensing requirements to be aware of. The exact licenses needed will vary based on the business activity and location and not on the choice of business structure. Some common requirements include:
- State of Nevada business license: The State of Nevada requires a business license for every entity operating in the state.
- Local business license: In addition to the state business license, you may need city or county licenses. The rules for business registration vary by location and business type. Check with local city officials or an economic development office for specific requirements.
- Nevada Business Identification Number: If your business sells physical products, offers certain services, or hires employees, apply for a Business Identification Number through SilverFlume, Nevada’s business registration portal.
- Occupational permits: Certain professions in Nevada are regulated and require permits. For example, contractors, childcare providers, and cosmetologists need specific permits.
- Employer Identification Number (EIN): While not always necessary for sole proprietorships, an EIN is required if you plan to hire employees. Some banks may also require an EIN to open a business account, or you can use your social security number.
