Sole Proprietorship.
The default. You are the business.
If you're earning money as yourself and haven't filed anything, you're a sole proprietor. It's free. It offers no liability protection. It's what most side hustles start as.
How the IRS sees this entity.
Personal (Schedule C)
Profit lands on the owner's personal return. The entity itself pays no federal income tax — the tax knife only cuts once, at personal rates.
What you owe, and when.
Forming the entity is the easy part. Here's the recurring paperwork that keeps it alive.
What this trades, and for what.
- Free to start
- No paperwork
- Simple taxes (Schedule C)
- Full control
- Unlimited personal liability
- Harder to raise money
- Self-employment tax on every dollar
- Dies when you do
The founders this fits.
- Solo freelancer invoicing <$40k/yr.
- Testing an idea in the evenings.
- No contracts that could trigger a lawsuit.
You have real liability exposure or expect >$50k in profit.
Where to actually file.
- Your home state
Sole prop is always local — you don't "form" anywhere.
When to move on.
-
Triggered when: Any real liability exposure, or first client contract.
File Articles of Organization in your home state. Move the bank account.
Related articles.
Still not sure this is the right fit?
The seven-question quiz maps residency, revenue, and risk to a specific entity-and-state recommendation. No email required.