Ready to take your hobby to the next level? Do you want to make things “official” and legal in the eyes of Uncle Sam? Then you’re ready to establish a business entity. Chances are, if you’re just starting out and you’re not really worried about getting sued or owing a lot of money to creditors, you will have to set up the most basic form of business, which is a sole proprietorship (at least for now.)

The good news is, establishing a sole proprietorship is relatively simple, inexpensive, and doesn’t require a lot of legal mumbo-jumbo.  

While the fees and specific steps may vary depending on where you’re going to operate, below are the general steps that you need to know to get started:

1. Determine the name of your business - As a sole proprietor, you can use your own name and operate the business under it. However, if you want to operate under a different name i.e. “Awesome Graphic Design” then you will have to file a dba or “doing business as”.

2. Obtain the necessary licenses (if any) - Depending on what type of business you have, you may need to obtain certain licenses. For instance, if you’re going to provide beauty services, you will need a cosmetology license.

3. Get your EIN - As a sole proprietor, you aren’t required to have an Employer Identification Number (EIN), as you can use your social security number for tax purposes. But it’s highly recommended that you obtain your EIN anyway. For one thing, you wouldn’t want to give your SSN every time someone needs your tax info and for another, having an EIN helps you separate your business taxes from your personal affairs to keep things simpler.

Image credit:  John-Morgan on Flickr