You probably think of a business as this big, scary machine with a board of directors, fancy glass offices, and a mountain of legal paperwork. But honestly? Most businesses aren't like that. Not even close. If you’ve ever paid a neighbor to mow your lawn, hired a wedding photographer, or bought a custom sweater from a creator on Etsy, you’ve interacted with companies that are sole proprietorship setups.
It’s the most basic way to exist as a business. No partners. No stockholders. Just one person calling every single shot. In the United States, about 86% of small businesses have no employees at all. They are just individuals doing their thing.
But there is a weird misconception that "sole proprietor" means "small" or "unsuccessful." That’s just not true. Some of the most massive brands on the planet—names you see every single day—started exactly this way. They didn't have a legal team or a C-suite. They had a garage, a trunk, or a kitchen table.
Why Big Brands Started as Companies That Are Sole Proprietorship
It’s easy to forget that Under Armour wasn't always a multi-billion dollar athletic giant. Back in 1996, Kevin Plank was just a guy with a better idea for a t-shirt. He operated as a sole proprietor, literally selling moisture-wicking shirts out of the trunk of his car in Washington, D.C. He was the CEO, the delivery driver, and the warehouse manager all at once.
Then you have eBay. Pierre Omidyar started it as a personal hobby site. He didn't incorporate right away. He just wanted to see if people would buy stuff from each other. He was the "company."
Famous Examples You Might Know
- Sears, Roebuck, and Company: Richard Warren Sears didn't start with a department store. He started by selling watches through a mail-order catalog. He was a one-man show before he eventually partnered up with Alvah Roebuck.
- Coca-Cola: John Pemberton created the original syrup in a brass kettle. He was a sole proprietor selling a "tonic" at a pharmacy for five cents a glass.
- Amazon: Jeff Bezos famously started packing books in his garage. While he moved to a more complex structure quickly to raise capital, the root was that classic "one guy with a vision" model.
The reason these companies that are sole proprietorship legends grew so fast is because they didn't have to wait for a committee to vote. If Kevin Plank wanted to drive to a different football game to sell shirts, he just did it. That speed is a superpower.
The Reality of Running a One-Person Show in 2026
If you’re thinking about starting a business today, you’re basically a sole proprietor by default. If you start charging people for your graphic design skills or your consulting advice, the IRS already considers you one. You don't even have to file "formation" papers with the state like you would for an LLC or a Corporation.
It’s easy. It’s cheap. You just... start.
But there’s a catch. A big one.
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In a sole proprietorship, you and the business are the same person. Legally, there is no wall between your "work" money and your "house" money. If your business gets sued because someone tripped over your equipment, or if you take out a loan and can't pay it back, they aren't just coming for your business bank account. They’re coming for your car, your savings, and maybe your house.
The Trade-Offs Nobody Tells You
Most people focus on the "freedom," but honestly, it’s a lot of pressure. You’re the IT department. You’re the accountant. You’re the person who has to figure out why the website is down at 2:00 AM.
According to data from the SBA in 2025, over 29 million "non-employer" firms are active in the U.S. That’s a lot of people wearing ten different hats. The tax side is actually simpler, though. You don't file a separate business tax return. You just put your income and expenses on a Schedule C and attach it to your personal 1040.
Wait, though—you do have to pay self-employment tax. That’s the roughly 15.3% that covers Social Security and Medicare. Usually, an employer pays half of that, but since you’re the boss and the employee, you pay the whole thing. Kinda sucks, right?
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Scaling Up: When "One" Isn't Enough
Can you stay a sole proprietor forever? Sure. Many people do. A lot of successful consultants and freelancers make six figures and never feel the need to change.
But there comes a point where the risk becomes too high. If you’re hiring employees, the legal complexity jumps. If you’re dealing with high-value contracts, the liability protection of an LLC becomes a "must-have" rather than a "nice-to-have."
Most companies that are sole proprietorship eventually "graduate." They become LLCs to protect their personal assets or C-Corps to attract investors. You can’t sell stock as a sole proprietor. You can't bring on a partner without the whole structure technically dissolving and becoming a Partnership.
Surprising Industries Where This Structure Rules
- Direct Sales and Creators: YouTubers, TikTokers, and influencers.
- Trade Services: Plumbers, electricians, and landscapers often start (and stay) this way.
- Professional Services: Many independent accountants and bookkeepers.
- E-commerce: Small-scale Shopify and Etsy sellers.
Actually, the rise of the "solopreneur" movement has made this more common than ever. With AI tools handling things like scheduling and basic copywriting, one person can do the work that used to require a staff of five.
Mistakes to Avoid if You're Going Solo
Don't be the person who mixes their personal and business bank accounts into one messy pile. Even though the law says you can use your personal account for a sole proprietorship, your future self will hate you during tax season. Open a separate business checking account. It makes tracking your "actual" profit so much easier.
Also, get insurance. Since you have no "corporate veil" protecting your assets, a solid professional liability policy is your only real safety net.
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Actionable Steps for New Owners
- Check Local Licenses: You might not need "formation" papers, but your city might still require a general business license.
- Get a DBA: If you don't want to use your own name (e.g., "John Smith"), you’ll need to register a "Doing Business As" name.
- Track Everything: Use a simple tool like QuickBooks or even just a dedicated spreadsheet from day one.
- Save for Taxes: Set aside 25-30% of every check. Don't spend it. You’ll owe it to the IRS every quarter.
Running a company as a sole proprietor is the fastest way to test an idea. It’s how the biggest names in history got their feet wet. It’s not about being small; it’s about being agile. Whether you stay a one-person show or grow into the next global powerhouse, this structure is usually where the story begins.
The most important thing to remember is that you aren't just "freelancing." You are the owner of a business. Treat it like one, and the growth will follow.
Next Steps for Your Business
- Verify your local zoning laws to ensure you can legally operate your specific business type from your home.
- Apply for an EIN (Employer Identification Number) via the IRS website; even if you don't have employees, it's safer than using your Social Security number on every contract.
- Consult an insurance agent to find a general liability policy that covers your specific industry risks.