How to Start a Sole Proprietorship in Delaware

DBA Acquisition

A Doing Business As (DBA) name is valuable for many sole proprietors as it allows them to use an assumed business name rather than their personal name. Acquiring a DBA has several advantages, including enhancing your business's professional image and instilling trust in customers.

Additionally, having a DBA enables you to open a business bank account under your business name, further legitimizing your operations. To obtain a DBA in Delaware, follow these steps:

1. Conduct a trade, business, and fictitious names search to check if your desired name is available.
2. If your chosen DBA name is available, submit a Registration of Trade, Business, and Fictitious Name Certificate to the county where you intend to conduct business.

Determine Taxation Requirements

Sole proprietors typically don't require a federal Tax Identification Number (EIN) if they have no employees. Instead, you can use your Social Security Number (SSN) for most purposes. However, obtaining an EIN can enhance privacy and is advisable if you prefer not to use your SSN.

Your tax obligations as a sole proprietor in Delaware depend on your business's nature. Some industries may require specific tax registrations. Delaware offers the One Stop Business Registration and Licensing system, simplifying the process of registering your business and ensuring you comply with applicable taxes.

Obtain Business Licenses and Permits

Delaware mandates all businesses, including sole proprietorships, to register for a general business license. This license is valid for one year, expiring on December 31st annually. The standard filing fee is $75, with prorated fees for mid-year registrations. You can apply for this license through the One Stop Business portal or by downloading, completing, and mailing the PDF form to the Delaware Division of Revenue.

Depending on your business's nature, you may require industry-specific licenses or permits. Delaware provides various licenses and permits, and the One Stop Business Registration and Licensing system can help you determine which ones apply to your sole proprietorship. Additionally, check local requirements, as cities like Wilmington, Dover, and Newark may require local business licenses and permits.

What Is a Delaware Sole Proprietor?

A Delaware sole proprietorship is a simple business structure where the owner and the business are not legally distinct entities. It's often operated under the owner's personal name. Here are key aspects to understand:

1. Tax Responsibilities:

Sole proprietors report business profits and losses on their personal tax returns, eliminating the need for separate business tax returns.

2. Contracts:

ole proprietors can sign contracts using their personal name, and customers can write checks directly to the sole proprietor's name.

3. Asset Commingling:

Unlike formal business structures like LLCs and corporations, sole proprietors can freely mix personal and business assets. However, this flexibility comes with a downside – in case of legal issues or creditor claims, personal assets can be at risk.

Conclusion

While starting a sole proprietorship in Delaware is relatively simple and doesn't require a formal registration or fees, it's crucial to address taxation, licensing, and naming considerations. By staying informed and compliant, you can operate your sole proprietorship successfully in Delaware. We hope this guide has answered your questions and wish you success with your business!

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Disclaimer: The content on this page is for informational purposes only and does not constitute legal, tax, or accounting advice. Seek the counsel of a licensed professional for specific questions related to these topics.