What is a Sole Proprietorship?

A sole proprietorship is just you doing business as you. No separate legal entity. No separate tax return. Profits and losses flow onto your personal Form 1040 using Schedule C. The tradeoff is that you and the business are the same legal person, which means you get all the profit and also all the risk.

Creators like it because it costs almost nothing to start, there is almost no paperwork, and you can test ideas without locking yourself into a complicated structure. If you later decide to form an LLC or elect S corp status, you can migrate when the time is right.

How Taxes Work

You report your creator income and expenses on Schedule C as part of your end of year tax return. If your net profit is more than $400, you also owe self employment tax, which covers Social Security and Medicare. The combined rate is 15.3% on net earnings, with the Social Security portion capping out each year. Half of the SE tax becomes an above the line deduction on your 1040, which softens the hit a little. Read more here: The Ultimate Guide to Content Creator Taxes in 2025

Because there is no employer withholding, the IRS expects you to pay as you go. That is why quarterly estimated taxes exist. If you expect to owe $1,000 or more for the year, pay estimates in April, June, September, and January. For the 2025 tax year, the due dates are:

• April 15
• June 16
• September 15
• January 15, 2026

A simple way to stay ahead is to move 25% to 30% of every payout into a separate savings account labeled taxes. When estimates are due, you are not scrambling. You just transfer from the tax bucket and keep moving.

Beluga makes this process incredibly easy. You will never miss a tax bill (which can lead to penalties) and you will always be maximizing your savings, keeping more of your hard earned cash.

What You Can Deduct

Anything ordinary and necessary for running your creator business is a candidate. Start with the obvious and build from there.

• Gear and tech. Cameras, lenses, mics, lighting, computers, tablets, storage, capture cards.
• Software and digital tools. Editing apps, design suites, plugins, transaction, cloud storage, hosting, domains.
• Content costs. Music licenses, stock footage, props, set materials, paid assets.
• Operations. Bookkeeping tools, payment processing fees, legal or accounting help, insurance.
• Workspace. Home office if it is regular and exclusive, or a studio, storage unit, or co-working membership.
• Internet and phone. Deduct the business portion. Track how you calculated it.

Keep receipts or bank records and a short note on business purpose.

The Home Office

If a space in your home is used regularly and exclusively for work and is your principal place of business, you can deduct it. You can take the simplified method, which is a flat amount per square foot, or you can calculate actual costs by percentage of your home. The simplified method is fast. Actual costs may be larger if your rent and utilities are high. Keep the square footage and a photo in your files.

Names, DBAs, EINs, and Bank Accounts

You can operate under your legal name or pick a business name. If you want a name that is not your legal name, register a DBA (doing business as) in your state or county. It is a short form and a small fee in most places.

Get an EIN from the IRS for free. It lets you open a business bank account and send W-9s without giving out your Social Security number. Many banks will ask for the EIN and your DBA certificate if you use a trade name.

Open a separate business checking account. This is the most underrated move in small business. Clean books. Easier taxes. Less risk of mixing personal and business spending. Looks more professional when clients pay you.

Depending on what you sell and where you operate, your city or state may require a basic business license or a sales tax permit for merch. Check your local rules.

Pros and Cons

Pros

• Free or close to it. Little to no formation cost.
• Easy to start and stop. No annual corporate fillings.
• One tax return. Schedule C lives with your 1040.
• Full control and direct access to profits.

Cons

• Unlimited personal liability. You and the business are the same legal person. If a dispute turns into a lawsuit, your personal assets are exposed. Insurance helps but does not change the legal structure.
• Self employment tax on all net profit. As profit grows, that 15.3% stings.
• Harder to get loans. You cannot sell stock and some lenders prefer LLCs or corporations.

When to Incorporate

Staying a sole proprietor makes sense if you are testing the waters, your income is still small, and your risk is low. Many creators ride this stage through their first couple of years.

Start thinking about an LLC once you have consistent income, bigger brand deals, contracts that carry real liability, or personal assets you want to protect. The LLC gives you a liability shield if you keep your books clean and do not mix funds. Taxes can remain the same pass through style, or, when profit gets into mid five figures, you can elect S corp status for potential self employment tax savings by paying yourself a reasonable salary and taking the rest as distributions. That path adds additional hurdles through payroll, more frequent fillings, and increased compliance needs. However, it can save money compared to operating as a sole proprietor.

Retirement Savings

Sole proprietors can still save like others for retirement. A SEP IRA or Solo 401(k) lets you stash far more than a traditional or Roth IRA, and those contributions reduce your taxable income. If you want something simple, start with a SEP. If you want higher limits and you are comfortable with a little setup, a Solo 401(k) is great.

Simple Checklist

• Open a business checking account and route all creator income there.
• Get an EIN and, if using a trade name, register a DBA (doing business as).
• Track income and expenses in one place. A spreadsheet is fine to start.
• Move 25% to 30% of every payout into a tax savings bucket.
• Put the four estimate dates on your calendar.
• Keep receipts and note business purpose.
• Revisit entity choice once profit and/or risk grow.

Bottom Line

Sole proprietorship is the default because it is simple and it works. If you are a creator or self-employed and the money has started to come in, you are already in business. Use the structure to your advantage. Keep clean books, take every legitimate deduction, pay quarterlies on time, and switch to an LLC or S-corp when it makes sense. That is how you keep more of what you earn.

If you want help keeping your financials organized, Beluga pulls your payouts into one place, tags likely write offs, and keeps you tax ready year-round so you can focus on making great stuff instead of wrestling spreadsheets and numbers.

Keep on Creating!

— The Beluga Team