Small Business Development Guide
Business Entities
Sole Proprietorship
A sole proprietorship is a business operated and owned by a single person where this person is legally and financially liable for all activities which occur within the business.
A sole proprietorship is formed by simply: registering the business name (if applicable); getting a business bank account; obtaining any necessary licensing and permits; and taking care of your taxes. The taxation details for a sole proprietorship are as follows:
- Social Security and Medicare Taxes are paid through self-employment tax due annually (Schedule SE Form). Payments for this tax are due in estimated quarterly installments to the Federal Government (Schedule ES Form). For more information, call the IRS at 1-800-829-1040.
- Federal Income Tax is figured on a Schedule C Form to be filed with your Form 1040 at the end of the year. For more information call the IRS at 1-800-829-1040.
- State Income Tax is figured by the amount of profit found on the Form 1040 of the Federal Income Tax. File a Form IT-1040 with the Ohio Department of Taxation or call (216) 787-3135 for more information.
- Local/Municipal Income Tax may be due for your business. Contact your local tax department for more information.
You may use your social security number for the transactions of the business and as a Tax ID Number (it is not necessary for you to obtain a separate Tax ID Number unless you have employees). It is optional to have workers' compensation for yourself. If you would like Workers' Compensation, call 1-800-644-6292.