Although most small businesses should form an LLC or corporation, many can operate a good small businesses as a sole proprietor (especially creators who are just moonlighting).
Below are some considerations for creators who choose to work under their own name as a sole proprietor.
Running a sole proprietorship is one of the easiest ways to run a business. You simply market your services and sign contracts under your own name (or a DBA if you want). And that’s it. You get work, you do the work, you get paid.
If you only do a few projects a year, and your risk is very low, this may be a good option. But for most other creators, it is better to form a business entity.
Sole proprietors simply attach a Schedule C to their personal tax returns where they report income or loss from their business. They then pay taxes at their individual tax rate on the business income.
One of the biggest risks to operating a small businesses as a sole proprietor is liability. When you operate like this, you will be personally liable for everything that happens through the business. That means your clients can sue you directly to enforce their rights against you.
Depending on your target client, you may or may not want to be a sole proprietor. Some clients are ok hiring individuals, but other clients will want to hire a business entity for a variety of reasons.
There’s so much more to learn! Here are a few related guides you should read: