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Can a Sole Proprietor Have Employees?

7 minute read

A sole proprietorship is an easy way to start a business. Because you do not have to encounter as many obstacles, since it is a single-owner unincorporated business, sole proprietorship is one of the most straight-forward business entities to establish.

One of the great things about sole proprietorship is autonomy: you are only accountable for yourself. However, as businesses grow and change the need for employees may arise. Are sole proprietors able to have employees?

Can a Sole Proprietor Have Employees?

Yes! A sole proprietor can have employees as long as they are compliant with all appropriate tax and labor laws. There are two things a sole proprietor must do to hire employees: (1) register with the tax bureau and obtain an employer identification number (EIN) (2) register the business with their respective state tax office.

After this is completed a sole proprietor must comply with all tax requirements and pay all state and federal taxes for their employees. This includes employee income taxes, state and federal income taxes, and payroll taxes. Though this may seem tedious and costly, there are associated benefits. Sole proprietors are able to claim numerous tax credits and deductions that are not available to others.

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How Many Employees Can a Sole Proprietorship Have?

It depends. Local regulations may impact employees of a sole proprietor, but by obtaining the proper licenses and permits to operate their business, it is unlikely there are any limits placed on the number of employees the business can hire. However, local land use and zoning regulations may restrict the number of employees a business (not just sole proprietors) can have on the premises or parking options for employees.

Getting the Most Out of Your Sole Proprietorship

If you are a sole proprietor looking to hire employees to grow your business and save on taxes, Corvee Tax Planning Software can help to find strategies to fit your circumstances and maximize tax savings for your sole proprietorship. Get a demo today!

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