When launching and managing a small business, it can be challenging to understand the nuances of the law. From filing taxes to local regulations, every business must comply with various legal requirements and guidance. For business owners based in the greater Los Angeles area, here are answers to some of the most frequently asked questions about sole proprietorships and legal matters.

Commonly derived from personal experience in the business world, a sole proprietorship reflects a self-employed individual in business as an individual acting as the one person responsible for legalities within the business, meaning they are not a partnership and not incorporated. This designation and structure offers a few important advantages to entrepreneurs, so it’s important that you understand how it works and what your responsibilities as a sole proprietor are.

Basic Definition of a Sole Proprietorship

At its most basic, a sole proprietorship in Los Angeles is an unincorporated business that is run by one individual, with no distinction between the business and the owner. If you choose this structure for your business, you as the individual will be legally responsible for all liabilities, taxes, debts, and any other costs related to the business.

Setting Up a Sole Proprietorship

The setup process for a sole proprietorship is simpler than that of a partnership or corporation. In the state of California, a small LLC or multi-state LLC does not require a legal entity to register. You do not need to file special paperwork other than a general “Doing Business As” (DBA) statement with the state and the county assessor. If your business has any employees, you will need to obtain workers’ compensation insurance, so you may wish to invest in a lawyer for assistance in that matter.

Tax Responsibilities of a Sole Proprietor

If you are a sole proprietor, you have the same state income tax obligations as any individual, which means you must pay taxes on all net income pick up by the business. Also, you must file a state and federal income tax return for the business. You will be required to make quarterly estimated tax payments to the state and federal governments.

Legal Obligations of a Sole Proprietor in Los Angeles

There are certain laws you must abide by as a sole proprietor. In California, for instance, you and your employees must follow requirements such as workplace safety rules, wage and hour laws, and laws related to the business industry in general. Furthermore, you are required to get any applicable permits, such as a business license in Los Angeles County or local municipality.

Seeking Counsel for Legal Support

Sole proprietors in Los Angeles should be matched with a legal counsel who understands local regulations. With UpCounsel, entrepreneurs in the area can access experienced lawyers on-demand to handle any legal needs without having to create or maintain a full in-house legal department. Selected attorneys have an average of 14 years’ experience, and feedback from past clients is available for you to review.

By setting up and properly managing a sole proprietorship, you can become a better informed business owner and head of your own enterprise. As you’re learning, understanding local regulations on top of the federal ones is the key to ensuring that everything your small business does is compliant with the law. UpCounsel’s attorney network is a great place to find legal counsel that understand the nuances of legal matters in Los Angeles.


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