What Is a Sole Proprietor?

Definition: As the IRS defines a sole proprietor, the term means “someone who owns an unincorporated business by himself or herself.”

So, what exactly does that mean? Basically, if you start a business under your own name and have not incorporated it, you are a sole proprietor. Sole proprietors pay taxes on their business by filing a Schedule C on their personal income taxes. They do not need a tax ID number (TIN) but use their own Social Security number.

There are some circumstances when an incorporated single-owner limited liability corporation LLC may still be taxed as a sole proprietor. See this IRS Classification information for details.

Independent contractors, which is a tax term used to define who pays self-employment taxes vs. payroll taxes, are very often sole proprietors too. However, an independent contractor can be incorporated as an LLC, partnership, or other business structure. Typically the solo freelancer is a sole proprietor.

Also Known As: sole proprietorship

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