A sole proprietorship is an unincorporated business owned and run by one person. There is no distinction between the business and you, the owner. You’re entitled to all profits of your business, but you’re also responsible for any debts or other liabilities.
Sole proprietor taxes
A sole proprietor is not treated as a separate taxpayer. You’ll report income and/or losses and expenses as part of your personal income taxes using a Schedule C (Form 1040). Because of this, the owners of sole props are NOT considered employees for payroll purposes. Instead, they’re considered self-employed. This means that you may need to make estimated income and self-employment tax payments during the year. A sole proprietor without any employees typically does not have a need for a payroll provider. If you do plan to pay employees, you must obtain an FEIN from the IRS.
Updated September 26, 2017
This article provides general information and shouldn’t be construed as tax, benefits, legal, or HR advice. Rules and regulations may change over time and may vary by location. So, please consult an appropriately certified expert (such as a lawyer, CPA, tax advisor, licensed broker, or HR expert) for advice specific to your circumstances.