A sole trader (sole proprietorship in the US) is an unincorporated business owned by one person. It's the simplest business structure with no legal separation between the owner and business. All profits are taxed as personal income, reported on Schedule C of Form 1040.

Self-employment tax is 15.3% (12.4% Social Security + 2.9% Medicare) applied to 92.35% of net self-employment earnings. For 2024, Social Security applies to the first $168,600. An additional 0.9% Medicare surtax applies to income over $200,000 (single) or $250,000 (MFJ).

Common deductions include: home office ($5/sq ft simplified), vehicle (67¢/mile for 2024), supplies, equipment (Section 179), advertising, professional services, insurance, phone/internet, travel, meals (50%), software subscriptions, and continuing education related to your business.

Yes, if you expect to owe $1,000+ in taxes for the year, you must make quarterly estimated payments using Form 1040-ES. Due dates: April 15, June 15, September 15, and January 15. Use IRS Direct Pay or EFTPS for payments.

The Section 199A Qualified Business Income deduction allows sole traders to deduct up to 20% of their net business income. Phase-outs apply for specified service businesses (consulting, health, law) when taxable income exceeds $182,100 (single) or $364,200 (MFJ) in 2024.

Report business income and expenses on Schedule C (Form 1040). Calculate self-employment tax on Schedule SE. The net profit flows to Form 1040 Line 8. You'll also receive 1099-NEC forms from clients who paid you $600+ during the year.

Yes, self-employed individuals can deduct 100% of health insurance premiums for themselves, spouse, and dependents as an above-the-line deduction. This reduces both income tax and SE tax base. The deduction cannot exceed your net self-employment income.

Solo 401(k): Up to $23,000 employee + 25% employer contribution (max $69,000 total). SEP-IRA: Up to 25% of net SE income (max $69,000). SIMPLE IRA: Up to $16,000 + 3% match. All contributions reduce taxable income.

LLCs provide liability protection but don't change taxation for single-member LLCs (still Schedule C). Consider S-Corp election if profits exceed ~$40K to potentially reduce SE tax. Weigh costs of formation, state fees, and compliance requirements with a tax professional.

Maintain records for 3-7 years: income documentation (invoices, 1099s), expense receipts, bank statements, mileage logs, asset records, home office measurements, and prior tax returns. Use accounting software like QuickBooks or Wave for easier tracking.