Q: How do I start a Sole Proprietary Business in NC selling hand made goods?

A: A sole proprietorship is a business owned by one person, which has little legal significance separate from its owner and usually requires no governmental filing except a fictitious-business-name statement, which discloses the name under which the business will be conducted and the owner's name and address. In North Carolina, this is known as a "certificate of assumed name" and must be filed with the register of deeds in the county or counties where the business operates.

Although the sole proprietorship is probably the most prevalent form of small business in the U.S., it is often a poor choice because the owner has unlimited liability for the losses of the business, thereby putting all of the owner's personal assets at risk. Protecting personal assets is a major reason many people form corporations or LLCs with the Secretary of State. What liabilities are associated with starting a business? Many people think of slip and falls on the business premises or consumer goods causing personal injury to those who buy them, but there are many other types of risk associated with starting a commercial venture. A hand-made Darth Vader puppet, for example, may not carry a high risk of causing personal injury to consumers, but Disney could sue the maker for infringement of its intellectual property. If Disney sues a LLC, for example, they are likely limited to the assets of the LLC for payment and may not collect directly from the members if the LLC's assets are insufficient to pay debts/liabilities.

Contact a NC-based attorney familiar with business formation and choice of entity issues for more information or assistance with organizing the appropriate business entity. Many attorneys, myself included, offer free consultations.

Regardless of what type of business entity you determine is best for your situation, you should maintain a separate bank account for your business and avoid mixing your personal funds with that of your business; keep a separate set of books, apart from your personal financial records; and make clear in all contracts with others that they are dealing with a business, by signing them as [YOUR BUSINESS'S NAME], by [your personal name].