Operating your business as a sole proprietorship has the advantage of being relatively simple as compared to creating a separate business entity, such as a corporation or limited liability company. Sole proprietors have less documentation requirements than these business entities, but some key documentation is still required. These documents include the appropriate licensing for your business, a permit for sales and use tax and, if necessary, registering your business name.

Business License

Every business owner, including sole proprietors, must obtain a business license from either the state, county or local municipality. For example, in Nevada, a sole proprietor must submit an application for a general business license to the secretary of state's office before engaging in business. In most states, the business license is obtained from the local municipality where the sole proprietor is doing business, such as in Chicago, Illinois. The license is usually valid for a limited time, such as one year, and must be renewed.

Trade Permit or Professional License

A sole proprietor engaged in a regulated trade or profession must also obtain a specialized permit or license before engaging in his trade or profession. For example, in Arizona, a sole proprietor engaged in a trucking or delivery service must obtain a commercial permit from the Arizona Department of Transportation. The licensing requirements of the requirements of the Arizona State Board of Accountancy must be met before a sole proprietor can act as a certified public accountant. In addition to obtaining the required permit or license, the sole proprietor has a continuing obligation to comply with the regulations of the state agency overseeing his trade or profession.

Sale and Use Tax Permits

Selling goods and services requires collecting sales tax in those states that impose a sales tax. A sole proprietor must register with the state taxing authority to obtain the appropriate permit or certificate to collect the sales tax. For example, in New York, sole proprietors must register with the Department of Taxation and Finance for a Certificate of Authority to collect sales tax, which must be prominently displayed at the sole proprietor's principal place of business.

Business Name Registration

Unless a sole proprietor uses his own name as his business name, state laws generally require the sole proprietor to register the business name he is using. Commonly referred to as a DBA – an acronym for “doing business as” – the business name is registered with a government office. In some states, this is done with a state agency, but it is usually done at the local level, at either the county clerk's office or courthouse. DBA registration is mandatory in states with DBA laws, except in Arizona where DBA registration is optional.