Missouri Sole Proprietorship

How to Become a Missouri Sole Proprietor

In Missouri, becoming a sole proprietor is simple. There’s no formal setup or fees. Just start working, and you’re good to go. However, it’s a good idea to consider some extra steps along the way, even though they’re not mandatory. Many sole proprietors find them helpful.

DBA Acquisition

A Missouri doing business as (DBA) name is a crucial part of many sole proprietorships, as it enables you to use an assumed name for your business, rather than your own personal name. The advantages of acquiring a DBA start with image ― most customers feel that an assumed name is more professional and trustworthy than doing business with a company that uses its owner’s personal name instead.

That said, sole proprietors can sign up for a business bank account using their DBA name, which is another step that goes a long way toward making customers feel more comfortable doing business with you.

If you’d like to claim a DBA or fictitious name in Missouri, you’ll simply need to file a Creation of Fictitious Name document with the Missouri Secretary of State. Keep in mind that doing so does not in any way guarantee your business exclusive rights to the name; the Missouri government states that there may be an infinite number of businesses using the same name as fictitious names are not exclusive.

Determine Taxation Requirements

Sole proprietors without employees usually don’t need to acquire a federal tax ID number (EIN), because as a one-person business, you can typically just use your own social security number for most things an EIN is used for. Still, if you would rather not use your SSN for privacy purposes, it would be a good idea to get an EIN regardless.

Beyond that, the nature of your business will determine which taxes apply to you as a sole proprietor.

In Missouri, your sole proprietorship will be required to pay state taxes to the Department of Revenue. Thankfully, the state makes it relatively easy for sole proprietorships to determine their tax liabilities through the state’s Online Business Registration System. When you register your business with the system, you’ll be informed of your tax liabilities and how to satisfy them.

Obtain Business Licenses and Permits

There isn’t a requirement in Missouri for sole proprietors to acquire a general business license, but depending on the nature of your business you may need other Missouri licenses and permits to operate in a compliant fashion.

There is a multitude of licenses issued by the state of Missouri that may or may not apply to your sole proprietorship. These are often industry-specific and range from agricultural licenses and professional licenses to environmental permits and certifications. While licenses are generally issued by different agencies, most of your business licensing requirements can be determined by visiting the Register My Business Page of the Missouri Business Portal.

In addition, you should check to see if your business needs any licenses or permits on the local level.

For example, the areas of St. Louis, Springfield and Branson require sole proprietorships operating within their jurisdiction to meet specified local licensing standards.

What Is a Missouri Sole Proprietor?

As opposed to a corporation or Missouri limited liability company (LLC), the sole proprietorship is not a legal business entity. The sole proprietorship is a one-person business that is not considered to be a distinct entity from the person who owns it, and it is frequently operated using the owner’s personal name.

Here are the three main things you need to know:

Tax Responsibilities

Because there’s no distinction between the owner and the business itself, sole proprietors don’t need to file business tax returns ― they instead simply claim any business profits or losses on their personal tax returns.

Contracts

Sole proprietors are allowed to sign contracts using their personal name, and along those same lines, customers can write checks to the business by using the sole proprietor’s name.

More Flexible

The other big difference between sole proprietorships and more formal business structures is the fact that sole proprietors are allowed to commingle business and personal assets as much as they want to. With LLCs and corporations, ownership is required to keep their assets separate from those of the company. The downside of this aspect for sole proprietors is that if your business is sued, creditors are free to pursue your personal assets like your house, car, personal bank accounts, etc. For corporations and LLCs, creditors are limited to your business assets.