Sole proprietorship and hiring: What you need to know before bringing someone on board

Sole proprietorships are the simplest way to start a business. For many entrepreneurs, it’s the first step toward financial independence. But as your workload grows, you may wonder: can a sole proprietor hire someone? And if so, how do you do it legally and compliantly?

In this article, Remote breaks down your options, obligations, and how to stay compliant when hiring as a sole proprietor.

Can a sole proprietor hire someone?

Yes. As a sole proprietor, you can hire others to support or grow your business. Your two main options are:

Hiring employees who follow your direction, work set hours, and are on your payroll
Hiring independent contractors who deliver specific services under contract and work independently

Each option comes with its own legal, tax, and administrative responsibilities. Choosing the wrong approach can lead to worker misclassification, penalties, or audit risk.

Feature	Employee	Independent Contractor
Level of control	You control work hours, tools, and how tasks are done	Contractor decides when, where, and how to complete work
Integration	Works as part of your team and internal processes	Operates independently, usually outside your systems
Tax obligations	You must withhold and pay payroll taxes (e.g., Social Security, Medicare)	Contractor handles their own taxes and reporting
Benefits	May be legally entitled to benefits (e.g., workers’ comp, paid leave)	No benefits required or expected
Engagement style	Often long-term, with fixed schedule and regular duties	Typically project-based, short-term, or task-specific
Compliance risk	Low if treated correctly, but more admin overhead	Higher risk of misclassification if treated like an employee

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Sole proprietorship and hiring: What you need to know before bringing someone on board