What’s the Difference Between a Sole Proprietor and a Self-Employed Individual?
As a self-employed individual, you’ll earn money without working for an employer. All sole proprietors are self-employed. But not all self-employed people are sole proprietors. You can be self-employed as an independent contract, LLC owner, and more.
Does a Sole Proprietorship Need a Business License?
No. A sole proprietorship doesn’t need a business license to open its doors. But many states require additional licenses and permits that you may need to operate legally.
What Are Some Examples of Sole Proprietorships?
A few examples of sole proprietors include small businesses that offer photography services, operate an online store, operate a brick-and-mortar store, or sell products directly to customers.
How Much Does It Cost to Start a Sole Proprietorship?
It’s free to start a sole proprietorship because there is no filing requirement.
How Do You Register as a Sole Proprietorship?
You don’t have to register as a sole proprietorship. But you can register your business name through your state’s business filing office.
Does a Sole Proprietor Receive a Salary?
As a sole proprietor, you won’t pay yourself a salary. Instead, the money you earn is the profits of the business.
What Are the Tax Requirements for Sole Proprietors?
Sole proprietors will file a Schedule C with their personal income taxes to report their business income. The sole proprietor will pay a 15.3% tax on the profits, half of which is FICA like an employee and the other half SUTA (which employers pay on employees). Additionally, they’ll pay income taxes on the profits.
What Are Alternatives to Sole Proprietorship?
A sole proprietorship is not the only business structure available. You can also choose to open an LLC, partnership, or corporation. Each offers varying levels of personal asset protection but comes with additional paperwork requirements and costs.
How is a Sole Proprietorship Different from an LLC?
A sole proprietorship is not a separate legal entity from the business owner. With that, a sole proprietor is held liable for business debts and lawsuits. When you form a Limited Liability Company (LLC), it’s a separate legal entity. With this separation, the business owner’s personal assets are protected from any business debts or lawsuits.
Does a Sole Proprietor Need a DBA?

A sole proprietor doesn’t necessarily need a DBA. But in many cases, it’s a good idea. Essentially, this allows you to operate your business under a fictitious name without forming a new business entity.

Can You Hire Employees if You’re a Sole Proprietor?
Yes, sole proprietors can hire employees with an EIN.

Final Word

You can start a sole proprietorship simply by beginning your business activities. But taking extra steps to legitimize your sole proprietorship will provide more credibility as you reach out to potential customers. 

At some point, you may decide the risks of your business are too much of a threat to your personal assets. It’s important to note that you can also transition your sole proprietorship into a different business structure later.

About the Authors

Sarah Sharkey

Written by: Sarah Sharkey

Personal Finance Writer

Sarah Sharkey is a personal finance writer who enjoys helping people make better financial decisions. Sarah enjoys traveling, hiking and reading when she is not writing.

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Joe Templin

Reviewed by: Joe Templin

ChFC - Charted Financial Consultant

Joe Templin is a Charted Financial Consultant (ChFC), MCEC, CEC, CLU and CAP with well over three decades consulting, coaching, and teaching. He's an author of the Amazon Kindle #1 New Release "Every Day Excellence" and host of The Human Kaizen Podcast.

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Kal Salem

Fact checked by: Kal Salem

MA Accounting - Arizona State University

A CPA and finance professional working with small businesses to educate owners and grow alongside their businesses. He holds a Masters in Accounting and a BS in Supply Chain Management. Owner at Salem CPA Services LLC.

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