What are some of the considerations that would make me consider being a sole proprietor in my role as an escort?
I am working as an escort, and want a simple and easily manageable way to report my income and file my taxes.
My expenses are minimal—I advertise as an independent consultant, don’t rent space, and most often use my own car for transportation.
I’m doing this temporarily while I further my education / work on another career / support my family. I don’t intend to expand my escort work onto a larger platform.
If these statements are true to you, chances are you’re thinking of registering your escort business purely so that you can file taxes for money you’ve made from working as an independent escort. You probably aren’t up at night worrying about if your name or the cute flower you have next to it on your website is going to get stolen, or your specific business identity squandered. And most likely you don’t want to be filling out any more paperwork than is absolutely necessary—really, who makes filling out paperwork a recreational pastime?
Thankfully, there is a relatively easy way to make your business legal and to file taxes on your income without creating a separate entity and adding page after page onto your returns. This is called a sole proprietorship.
As a sole proprietor, you’re basically registering the business of you. “Jane Doe” is not only a person but, in the case of the escort world, a business supplying a service. The time you spend with clients and the fee that you receive becomes your business, and these transactions need to be registered and taxed.
Why register the business if it’s so small and containable?
Taxes. They pay for government services, from things as large as social security, unemployment and Medicaid to local projects such as roadwork and the maintenance of schools. All working citizens are forced to contribute to these projects. So the government takes the validation of your work and income rather seriously, and should you get personally audited with all that extra cash having come into and out of your accounts, they won’t be too happy. If you live in an expensive area or are paying for something pricey such as education or the purchase of a home or vehicle, for example, the government is going to wonder how you’ve been paying for that and will audit you. By registering your business, you’re saving yourself from a mess load of paperwork down the road, as well as contributing to services that will help you for retirement later in life.
Why a sole proprietorship?
When you freelance at this small level, you work with personal clients on a case-by-case basis rather than working together indefinitely. You’re getting paid by individuals for a service that may happen once or repeatedly, but you’re not together a guaranteed 40 hours a week with a set business goal in mind. You’re also not hiring employees or renting space such as you would with a large company.
With a sole proprietorship, all you’re doing is taking the income you’re making as an escort and letting the government know you’re making it. It requires the most minimal amount of additional paperwork out of any business model, as you file your business taxes with your personal income taxes.
Here we’ll go over the steps to starting any small business, and articulate which you will or will not have to do as a sole proprietor.
The steps to starting a business: sole proprietorship
- Research and Articulate Your Business: On this level, you already know what your business is and what it will serve, so all you need to do is articulate what that is, along the lines of “I provide time spent with my clients in social situations” or “I provide social consultations for my clients”.
- Finance Your Business: With other business models, you’d have to have startup funds and ways to pay employees. Because you’re working for and by yourself, you don’t need to find fees for anything other than marketing you want to do or products you buy for work such as clothes, shoes, health products etc. (and remember, these are tax-deductible too!).
- Register a Business Name: As a sole proprietor, the business name is you. “Jane Doe” is the name you’d use on any forms and when filing your taxes. You have the option to take on a Doing Business As (or DBA) name, but as a sole proprietor there’s really no reason to do this. Some states require you to file this DBA name with the secretary of state, others don’t. Either way, unless you have your heart set on being “Jane Doe Social Consulting Services” or the like, it’s just one bit of business that is unnecessary for this business model.
- Get a Tax Identification Number: In most states as a sole proprietor, your tax identification number is your own social security number. You will use that on all tax and registration forms, and don’t need to apply for a business tax ID.
- Register for State and Local Taxes: You’ll need to file self-employment taxes so that you can pay into social security and Medicaid. These will be filed along with your personal income taxes, so while it’s important to keep your personal and business information filed and calculate separately, you won’t have to undergo a second process when it comes to actually filing.
- Obtain Business Licenses and Permits: As a sole proprietor owning an escort service, chances are you won’t have to apply for any permits. Normally these are for things such as renting space, selling products, obtaining health permits or separate insurances for your clients or employees, etc. But since you will be working for yourself and most likely managing the paperwork and numbers for your business from home, you will most likely only be required to get a general permit for doing business, if any.
- Hire and File Employee Forms: If you don’t have to hire anyone, don’t. For example, if you use drivers to take you to and from clients, try to use a taxi or car service or a friend who has set up their own business as a driver, rather than hiring someone as an employee. This way they’re not a part of your business, and you can deduct these travel expenses from your yearly taxes. If you were to hire employees, you’d have many more forms to fill out and additional taxes to pay.
What are the advantages to being a sole proprietor?
This is the simplest and most easily managed business structure for inexperienced and/or small-scale business owners. There is essentially no difference between your business and you. You have sole responsibility for the workings of the business, and keep all profits from said work.
What are the disadvantages to being a sole proprietor?
Because of said sole responsibility, you also take on all losses that may occur. Thankfully, there isn’t a great chance that you’re going to go into debt being a freelance escort. Because you don’t rent space, require permits, need start-up funds to invest in initial products etc., there isn’t a great chance that you’re going to run into debt. However, in the case that your business gets into legal or financial trouble, you are personally responsible for correcting such trouble. You are also the only one to get the day-to-day work of your business done: marketing, scheduling, collecting of fees etc.
For a step-by-step guide on registering your sole proprietorship in your state, refer to our article How to register your small business by state.
To learn more about why you should register your business to begin with, read Don’t get busted for tax evasion: Why registering your escort business is the only option.
If you are looking to start a business only for yourself, or want to expand your business into a larger venture, refer to our articles:
Please note: Skipthegames.com is not a legal service, nor are we tax advisors or accountants. We do offer you what we consider our best advice, but if at all in doubt, please consult a professional.