Advantages
- Easy and inexpensive to start and close
- No separate business tax return required
- Minimal ongoing compliance burden
Disadvantages
- Full personal liability — savings, home, vehicle all at risk
- Harder to raise outside capital
- Business value tied entirely to you; limited transferability
- Only one owner allowed
Best For
- Solo, low-risk, early-stage ventures
- Testing a business concept before formalizing
Tax Filing
- Schedule C, attached to personal Form 1040
- No separate business tax return
Key Tax Consideration
Self-employment tax: 15.3% on all net income
This is in addition to regular income tax and often surprises new entrepreneurs.
- Self-employment tax: 15.3% on all net income — in addition to income tax
- Quarterly estimated tax payments required (Form 1040-ES)
Thinking about growing?
If your venture gains traction, consider transitioning to an LLC for liability protection while maintaining similar tax simplicity.