Back to Business Entities
Sole Proprietorship
Solo freelancers, consultants, small service businesses starting out
54 Pa.C.S. § 301 et seq.
Notice: Business entity selection and formation involve legal, tax, and liability considerations that vary by situation. This information is provided for educational purposes. Consult with a licensed attorney and tax professional for guidance specific to your business.
Key Facts
Formation Fee
Free
Liability
Unlimited personal liability
Taxation
Pass-through (Schedule C)
Owners
Single owner
Liability Protection
Unlimited personal liability
Tax Treatment
Pass-through (Schedule C)
Management Structure
Owner has complete control
Ownership
Single owner
Advantages & Disadvantages
Advantages
Simplest and cheapest to start
Complete owner control
Minimal regulatory requirements
Easy tax filing (Schedule C)
Disadvantages
Unlimited personal liability for all business debts
Harder to raise capital
Business ends when owner dies or withdraws
Less credibility with some clients
Formation Steps
1
Choose a business name
2
Register fictitious name ($70) if not using your legal name
3
Obtain EIN from IRS (free)
4
Apply for local business licenses
5
Open a business bank account