How to Set up a Sole Proprietorship in Tennessee
Create a business plan for your sole proprietorship., Contact your county or city clerk's office where you intend to do business., Decide if you would like to do business under your own name or under an assumed name., Keep track of business expenses...
Step-by-Step Guide
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Step 1: Create a business plan for your sole proprietorship.
Before you pay any fees in Tennessee, you should be ready to conduct viable business.
This plan should include expenses, start-up costs, marketing, debt repayment, employment and a schedule that results in your business being profitable. -
Step 2: Contact your county or city clerk's office where you intend to do business.
Inquire about acquiring a business license or registering for a business tax.
In many counties or cities, the license will be called an "Application for business tax license.
As a Tennessee sole proprietor, you are not required to file any forms on the state level.
However, you will be required to register for at least 1 type of tax, such as sales, excise or use tax, that will be due to your county or city.
Go to tn.gov/revenue/forms/general/regbusn.pdf to research the type of tax license your business will need to apply for and the applicable fees.
If you plan to do business in more than 1 county or municipality, you will need to register for a business tax license in all of the counties.
Contact the clerk in each area you plan to conduct business. , For example, you can decide to do business under "Stephanie Taylor" or "Stephanie Taylor Cleaning Services." In Tennessee, sole proprietorships are not required to register an assumed business name, but they may need to in order to open up a bank account under the assumed name.
Since the business is conducted automatically under your personal name, and its expenses and profits are listed in your own tax return, it is not necessary to have an assumed business name.
Contact the Tennessee Secretary of State office at (615) 741-2286 to apply for an assumed business name.
Since assumed business name applications are not available for sole proprietorships, that service is not offered on the website.
The office can direct you how best to complete the application.
The application costs $20. , Since you are not paying taxes to an employer, you will need to personally keep track of all income received from sales or contracts throughout the year. , You will need to add the tax that you applied for with the County or City clerk.
Send the tax to the county/city on a quarterly or yearly basis. , Deduct business expenses on the Form
1040.
Pay self-employment tax.
This tax pays for contributions to social security and Medicare that would automatically have been deducted if you worked for an employer.
For the year 2011, self-employment tax is
13.3 percent.
Half of that tax, or
6.65 percent, can be deducted from your income to calculate your gross adjusted income.
Tennessee does not have a personal income tax return except for interest and dividends. -
Step 3: Decide if you would like to do business under your own name or under an assumed name.
-
Step 4: Keep track of business expenses and income throughout the year.
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Step 5: Collect applicable tax from your customers throughout the year.
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Step 6: Report your income from your sole proprietorship on the IRS Form 1040
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Step 7: Schedule C. The income will be included in your personal gross income.
Detailed Guide
Before you pay any fees in Tennessee, you should be ready to conduct viable business.
This plan should include expenses, start-up costs, marketing, debt repayment, employment and a schedule that results in your business being profitable.
Inquire about acquiring a business license or registering for a business tax.
In many counties or cities, the license will be called an "Application for business tax license.
As a Tennessee sole proprietor, you are not required to file any forms on the state level.
However, you will be required to register for at least 1 type of tax, such as sales, excise or use tax, that will be due to your county or city.
Go to tn.gov/revenue/forms/general/regbusn.pdf to research the type of tax license your business will need to apply for and the applicable fees.
If you plan to do business in more than 1 county or municipality, you will need to register for a business tax license in all of the counties.
Contact the clerk in each area you plan to conduct business. , For example, you can decide to do business under "Stephanie Taylor" or "Stephanie Taylor Cleaning Services." In Tennessee, sole proprietorships are not required to register an assumed business name, but they may need to in order to open up a bank account under the assumed name.
Since the business is conducted automatically under your personal name, and its expenses and profits are listed in your own tax return, it is not necessary to have an assumed business name.
Contact the Tennessee Secretary of State office at (615) 741-2286 to apply for an assumed business name.
Since assumed business name applications are not available for sole proprietorships, that service is not offered on the website.
The office can direct you how best to complete the application.
The application costs $20. , Since you are not paying taxes to an employer, you will need to personally keep track of all income received from sales or contracts throughout the year. , You will need to add the tax that you applied for with the County or City clerk.
Send the tax to the county/city on a quarterly or yearly basis. , Deduct business expenses on the Form
1040.
Pay self-employment tax.
This tax pays for contributions to social security and Medicare that would automatically have been deducted if you worked for an employer.
For the year 2011, self-employment tax is
13.3 percent.
Half of that tax, or
6.65 percent, can be deducted from your income to calculate your gross adjusted income.
Tennessee does not have a personal income tax return except for interest and dividends.
About the Author
William Coleman
Specializes in breaking down complex cooking topics into simple steps.
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