Solopreneur: What It Means and How to Become One

Everyone who starts their own business is an entrepreneur, but if you choose to continue running your business by yourself, without bringing in partners or hiring employees, you are a solo-entrepreneur, or solopreneur.

The decision to remain a solopreneur instead of an entrepreneur involves weighing big financial and lifestyle trade offs. If you’re planning to start a business, consider the pros and cons of both options before setting up your business structure.

What is a solopreneur?

A solopreneur is a person who runs a business by themselves without co-managers or regular employees. According to a 2023 report published by the Small Business Administration, 82% of the small businesses in the U.S. have no employees, which likely makes their owners solopreneurs.

The benefits of running a business alone are attractive: the freedom to follow your own priorities, the simplicity of not having to manage employees and the minimal startup costs. The downsides are your need to master a wide range of skills and the inability to grow the business as large or as fast as more human and capital resources might make possible.

Solopreneur vs. entrepreneur

An entrepreneur is someone who starts a new business, either alone or with partners. If they launch alone and continue to run the business by themselves, they’re called a solopreneur. Working alone as a solopreneur lets you stay in control of every aspect of the businesses, which can be satisfying.

The decision to stay a solopreneur versus an entrepreneur with a bigger support team depends on your long-term goals. The total size and growth rate of a solopreneurial business will be limited by how much complexity you can handle by yourself. If you find opportunities to expand into new product lines, customer markets or additional services, you’ll likely seek more help in the form of investors, managers and employees.

Other single-person business structures

You’ll hear many different phrases used to describe one-person business structures. Here’s how they relate to solopreneurship:

• Sole proprietor. Sole proprietor is a legal term for someone who owns their business as an individual without a corporate structure. There are significant risks to operating as a sole proprietor, including personal and financial responsibility for any liability incurred by your business. You can be a solopreneur but choose a less risky legal structure, like an LLC, described below.
• Freelancer. A freelancer is someone who does “work for hire” for other companies on a part time, piecework or temporary basis. For example: A freelance journalist gets paid for articles they submit to various media, whereas a solopreneur writer publishes their own blog or newsletter and gets paid by advertisers or subscribers.
• Limited Liability Company (LLC). An LLC is a legal entity that owns and operates a business. A solopreneur can incorporate their business as an LLC to benefit from legal advantages such as limiting personal liability and making selling or transferring business ownership much simpler.

Pros and cons of working as a solopreneur

The best part of being a solopreneur is that you have total control over your product, marketing, company culture and financial destiny: it’s all yours, to build according to your dream.

The downside is that you are literally on your own, in terms of both financial and human resources — no outside investor money, no partners to share the vision and no team of regular employees to delegate responsibilities to. This can be lonely and even physically exhausting. The constant demands of running your business can also strain your social activities and relationships.

If you decide to go the solopreneur route, be intentional about making time for rest, exercise, friends and family. Prioritizing your own wellness may feel like it’s slowing down your business progress but it’s essential to your long-term success.

How to become a solopreneur

If solopreneurship feels like the right path for you, the following steps can offer guidance on getting started.

1. Research and test your business idea

Writing a business plan ensures you have a roadmap for transforming your business idea into a profitable enterprise. Your plan should include a business budget so you know how much money you can afford to spend.

In putting together your business plan, researching your target customer’s demographics (e.g., age, gender, income, interests) can offer valuable data for how to find them and motivate them to become your customer. An analysis of your competitors’ strengths and weaknesses also provides important insight into how you can deliver a superior product or service and price it competitively.

2. Register your business before you begin operating

Although sole proprietorships are convenient because they don’t require a formal registration process, you leave yourself legally vulnerable. Registering as an LLC or corporation offers legal advantages to solopreneurs such as protecting your personal assets if your business runs into financial difficulties.

The process for registering your business depends on which structure you choose and what state you register in. You’ll need to obtain an EIN (Employee Identification Number) from the IRS, and create organizational documents — articles of organization and operating agreements for LLCs or articles of incorporation and bylaws for corporations.

Depending on your location and business type, additional city or county registrations and licenses may be required. All filings will incur fees and the amount will vary by state.

3. Calculate your startup costs and secure funding, if needed

Having a realistic business plan helps you calculate how much money you’ll need to raise. Even though launching as a solopreneur is relatively inexpensive, you’ll still likely incur startup costs for equipment, permits and licenses, inventory or supplies.

If this is your first venture, meeting the time-in-business requirements for a startup loan presents a challenge. You may need to self-finance with your personal savings — also called bootstrapping — until you meet the requirements for a small business loan. A business credit card can also help you meet short-term capital needs while helping build your business credit.

4. Open your business

With your planning completed it’s time to open your business. If it’s a brick-and-mortar business with a physical location, your tasks to launch might include leasing space, installing equipment, obtaining permits and licenses and securing property insurance. You’ll likely need a good website and invoice or payment processing ability.

5. Build brand awareness

There are multiple ways to generate buzz around your business, depending on the type of products or services you’re offering. For physical products that need to be tasted or tested, location-based marketing at fairs, festivals and community events are some low-cost strategies. Short demonstration videos posted on social media can help promote your new business, too.

Be wary of spending too much up front before you know if an advertising approach is really going to help you bring in customers. Observe what your competitors are doing and how well it seems to work for them. Consider launching with a “soft opening” to get customer feedback, identify potential problems and do some fine-tuning before ramping up to full scale.

Examples of solopreneur businesses

Working as a solopreneur means running a business without partners or employees. This business model can work in a wide variety of companies as diverse as these examples:

• Service businesses: Website, landscape or interior design; psychotherapy or physical therapy; bookkeeping or tax return preparation
• Product businesses: Food trucks, jewelry making, apparel imports

5 tips on running a one-person business

To set yourself and your business up for success:

1. Hire a tax professional. Even solopreneurs are faced with many tax filing requirements, like income tax, self employment tax and sales tax, to name just a few. Tax filing penalties for missed or incorrect reporting can be severe.
2. Establish a retirement account. As a solopreneur, you can take advantage of tax effective retirement accounts like traditional and Roth IRAs and solo 401ks. It might be worth talking to an accountant or fiduciary advisor when deciding what type of retirement account to choose.
3. Get good health insurance. Ask for referrals from other solopreneurs as well as trade associations in your industry to find an insurance plan that reduces your financial risk in the event of a medical emergency.
4. Spend your marketing dollars wisely. Solopreneurs need marketing strategies that bring in paying customers while being inexpensive enough for a small business to afford.
5. Work your network. Nurturing personal connections with potential customers, vendors, advisors and marketing partners is free and can be hugely valuable for the solopreneur. A book or seminar about networking for business can help you maximize the success of your networking efforts.