Question

No legal formality is required to start a sole trading business. True or False? Why?

Answer 1

False. It is not correct that there is no legal formality requirement to start a sole trading business. Some basic guidelines for starting a sole trading business are:

Business License

A sole trader should first consult with officials to obtain information on any licenses required to operate the business in the respective locality. He can obtain the necessary license application forms from the county clerk.

Payment of Taxes

A sole trader has to ensure that he is not evading any taxes and that his business meets the state and federal taxation requirements.

Self-Employment Tax

A sole proprietor has the responsibility to pay self-employment tax, that is, Medicare and Social Security taxes liable on him/her.