​​A Sole Proprietorship is any form of employment where by you are paid as a non employee.  Let's say your neighbor offers to pay you $500 to paint her garage.  You accept the offer, slap some paint on the wall and walk away $500 richer.  Sweeeeeet!!!!! Right?

Well let's look at it again.  First, you have a sole proprietorship as, again, any money made without an employer apart from yourself, makes you self employed.

 

Second, because she paid you more than $400 you now owe self employment tax of roughly 15.3%.  That's $76.50 of your $500 going to self employment taxes even before you begin to calculate income tax.

 

Third, as a sole proprietor, you and the business are one in the same.  This means that if you paint over a light bulb, which catches fire and burns the house down; you are getting sued and all of your personal assets are up for grabs.

 

Fourth and last, if you have a sizable business loss and you carry it as a sole proprietorship, the IRS computer system may  trigger an audit.

 

All of that said,  for a one time transaction, sole proprietorship is still the best option.  However, for an ongoing business, you may want to consider other options.