One-Person Business Guide

The United States had 30.4 million nonemployer businesses in 2023, generating $1.8 trillion in total receipts, according to the Census Bureau's 2023 NES-D release. That number has grown an average of 2.7% annually since 2012, consistently outpacing employer business growth.

If you are starting a one person business, you are entering a category that now accounts for the majority of all U.S. businesses. This guide walks you through the exact steps to set up your legal structure, manage your taxes, access free government resources, and build a sustainable solo operation.

A one person business is any company owned and operated by a single individual with no employees on payroll. The Census Bureau classifies these as "nonemployer establishments," and they range from freelance consultants to e-commerce sellers to licensed tradespeople.

Sole proprietorships make up 86.3% of all nonemployer firms, according to the SBA's 2024 FAQ report. The rest operate as single-member LLCs, S-Corps, or other structures. Your legal structure matters because it determines your liability exposure and tax treatment.

Running solo does not mean running small. Nonemployer businesses contributed approximately 6.4% ($1.8 trillion) of 2023 U.S. current-dollar GDP, according to Census Bureau data. You can build a six-figure or seven-figure operation without ever hiring a W-2 employee if you use the right tools and structure.

If you are weighing whether to stay solo or eventually hire, read our comparison of solopreneur vs entrepreneur models.

The steps below take you from zero to operational. Each one links to the detailed tools and resources you will need. If you have already started and want business ideas, check out our solopreneur business ideas list.

Step 1. Pick your legal structure. A sole proprietorship costs nothing to start but gives you no liability shield. A single-member LLC typically costs $50 to $500 in state filing fees and protects your personal assets if someone sues your business. Read our full breakdown of sole proprietorship vs LLC to decide.

Step 2. Register your business. File your LLC with your state's Secretary of State (or simply start operating as a sole prop). Get a free EIN from the IRS online portal. Our guide on how to register a business covers every state requirement.

Step 3. Open a business bank account. Separate finances from day one. See our ranked list of best business bank accounts for solopreneurs.

Step 4. Set up bookkeeping and tax planning. The IRS self-employment tax rate is 15.3% on your net earnings (12.4% Social Security plus 2.9% Medicare). Set aside 25–30% of income for combined federal and state taxes. Use accounting software to automate the process.

Step 5. Start generating revenue. Focus on a single offer, validate it with paying customers, and build from there. Create a small business marketing plan and set up a local SEO presence if you serve a geographic area.

If you want a structured LLC formation process handled for you, compare LLC formation services rated by price and speed.

You do not need a large tech stack. These four categories cover the operational foundation for most solo businesses.

• The QuickBooks Simple Start plan (starting around $30/month) handles invoicing, expense tracking, and Schedule C tax prep for sole proprietors and single-member LLCs. Compare it against alternatives in our accounting software guide.
• The Relay business checking account offers $0/month fees, no minimum balance, and automatic profit-first budgeting. See all options at best business bank accounts.
• Northwest Registered Agent provides LLC formation starting at $39 plus state fees, with a free year of registered agent service. Compare in our best LLC services roundup.
• A free SCORE mentor gives you one-on-one business advising at no cost. SCORE has 10,000+ volunteer mentors nationwide. Request one at score.org/find-mentor.

1. Skipping liability protection. Operating as a sole proprietor means your personal home, car, and savings are on the line if a client sues. An LLC filing costs a fraction of what one lawsuit would. If you are unsure how to form an LLC, start there.

2. Ignoring self-employment tax until April. The 15.3% SE tax hits many first-time solopreneurs hard. Set up quarterly estimated payments from your first profitable quarter. The IRS charges penalties for underpayment, and those add up fast.

3. Mixing personal and business finances. Commingling funds can "pierce the corporate veil" of your LLC, eliminating the liability protection you paid for. Open a dedicated business checking account before you deposit your first payment.

4. Trying to do everything yourself. A one person business does not mean you handle every task solo. Outsource bookkeeping, graphic design, or content creation to contractors so you can focus on revenue-generating work. Review entrepreneur burnout warning signs before you hit a wall.

5. Having no written contracts. Verbal agreements lead to disputes about scope, payment, and deadlines. Use a legal service to create standard client contracts. Templates start at $0 from services like LegalZoom and Rocket Lawyer.

You have access to several no-cost programs designed to help one person businesses get off the ground and grow. These are funded by the federal government and available to all U.S. business owners.

• The SCORE Mentoring Network provides free, confidential one-on-one mentoring through 10,000+ volunteer mentors. Since 1964, SCORE has helped more than 17 million entrepreneurs, according to SCORE.org. Mentored businesses have an 87% one-year survival rate versus 75% for non-mentored businesses, per SBA data.
• Small Business Development Centers (SBDCs) offer free business advising across nearly 1,000 locations nationwide, according to America's SBDC. SBDCs are hosted by universities and state agencies, and they specialize in business plans, financial projections, and market research.
• The SBA Microloan Program offers loans up to $50,000 (average loan is about $13,000) through nonprofit intermediary lenders, according to SBA.gov. Interest rates typically range from 8% to 13%, and terms can extend up to six years.

For grant opportunities, explore our guides to small business grants and startup funding options.

Your tax obligations as a one person business depend on your legal structure. A sole proprietor reports business income on Schedule C of their personal 1040 return. A single-member LLC does the same by default (it is a "disregarded entity" for tax purposes).

The self-employment tax rate is 15.3%, consisting of 12.4% for Social Security (on the first $176,100 of net earnings in 2026) and 2.9% for Medicare (no cap), according to the IRS. You can deduct 50% of your self-employment tax from your adjusted gross income.

Once your net profit consistently exceeds $60,000 per year, ask a CPA whether electing S-Corp tax treatment could reduce your self-employment tax liability. With an S-Corp, you split income into salary (subject to SE tax) and distributions (not subject to SE tax), which can save thousands annually.

You may also need to file quarterly estimated taxes using Form 1040-ES. If you owe $1,000+ in taxes for the year and have not withheld enough, the IRS can assess underpayment penalties. Consult a tax professional to determine the right structure and estimated payment schedule for your situation.

Start with three concrete actions. First, decide on your business structure and form your LLC if liability protection matters to you (it should). Second, apply for a free EIN and open a business bank account so your finances are separated from day one.

Third, request a free SCORE mentor who has built the kind of business you want to build. This costs nothing, takes 10 minutes to set up, and gives you a sounding board for every decision ahead. If you want the full roadmap for going solo, read our Solopreneur Guide.