Work for yourself and report the result on Schedule C, and you are a sole proprietor — the default, with no filing required to create it. Form a single-member LLC and, for tax purposes, nothing changes: the IRS disregards it and still taxes you as a sole proprietor. This is the point most new owners miss. An LLC is a liability shell, not a tax structure. It can protect your personal assets from business creditors, which is worth having, but it delivers exactly zero tax optimization on its own.
The cost of operating here is self-employment tax. An employee and employer split Social Security and Medicare taxes; a sole proprietor is both, and pays the whole 15.3% — 12.4% for Social Security on earnings up to the annual wage base, and 2.9% for Medicare on all of it, with an additional 0.9% above $200,000 (single) or $250,000 (joint). The tax is computed on 92.35% of net profit, and you may deduct half of it above the line, which softens the income-tax bill but not the cash outlay. Self-employment also makes you your own withholding department: you owe quarterly estimated payments ( IRS Pub. 505, “Tax Withholding and Estimated Tax”), and the section “Safe Harbor” rules govern how much.