The sole proprietorship is a business owned and operated by one individual.  The majority of farms are owned as sole proprietorships, as they are easily formed and administrated.  Because the business and owner are one in the same, the owner is responsible for the business' legal and tax liabilities.  Assets from the business may be used to satisfy personal debts, and personal assets may be attached to satisfy business liabilities. 

There is no statute in Illinois that governs the formation of a sole proprietorship.  Sole proprietorships are required, however, to register with the county in which they operate if the sole proprietorship operates under an assumed name (e.g., John Doe operates a direct farm business using the name "Green Acres" instead of "John Doe's Farm") (see registration requirements).  A sole proprietorship is subject to state licensing and permit requirements. 

A sole proprietorship must register with the Illinois Department of Revenue for tax purposes.  The individual owner is taxed personally on the profits generated by the sole proprietorship--no separate tax filing is necessary.  The taxation-initial set-up and other taxation pages explain taxation of sole proprietorships in more detail.

Continue to Corporations