A sole proprietorship is the easiest business structure to set up — no paperwork required to begin, full control of decisions, and your business income flows straight to your personal tax return.
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I started as a sole proprietor freelancing on weekends. Once revenue grew, LegalZen helped me convert to an LLC without missing a beat.
There's no formal filing required to operate as a sole proprietor — but most people still need a few things to look legitimate and stay compliant.
If you want to operate under any name other than your legal name, file a "Doing Business As." From $99.
File a DBA →Optional, but useful for opening a business bank account and avoiding using your SSN with clients. Free from the IRS.
Many cities and counties require basic business licenses. We'll point you toward what your area needs.
Sole proprietorships are great for getting started — but they don't protect your personal assets. Here's when most people make the jump to an LLC.
Best for getting started
You're a sole proprietor the moment you start doing business — no filing required.
Income goes on your personal Schedule C — no separate business tax return.
You and your business are legally the same. A lawsuit could put your personal assets at risk.
Best for protection and growth
The LLC is a separate legal entity, shielding your home, savings, and personal property.
Choose pass-through or elect S corp taxation as the business grows.
"LLC" after your business name signals you're serious to clients, lenders, and partners.
Not at the state level — you're automatically a sole proprietor when you start doing business. But you may need a local business license, a DBA if you use a different name, and possibly an EIN.
Business income and expenses go on Schedule C of your personal tax return. You'll also pay self-employment tax (~15.3%) on net earnings to cover Social Security and Medicare.
Common triggers: you're earning enough that a lawsuit could hurt, you want to hire employees, you're signing larger contracts, or you want to keep business and personal finances cleanly separated. Most freelancers convert when they hit consistent revenue.
Form an LLC and protect what you've built. Starts at $0 plus state fees.
Form my LLC