Sole proprietorship status in Puerto Rico is accessible and well-established. This overview covers the key requirements, tax rates, and regulatory obligations for individuals choosing to operate under the “Sole Proprietorship (Propietario Único)” status in Puerto Rico for the year 2025.
Availability of Sole Proprietorship (Propietario Único) in Puerto Rico
Individuals in Puerto Rico may operate as sole proprietors (Propietario Único) without creating a separate legal entity. This business status is common for small businesses and freelancers, as it enables individuals to invoice clients using their own name. Registering as a sole proprietor remains a straightforward option for residents seeking business flexibility in Puerto Rico.
Registration Requirements
Sole proprietors must register their business name with the Puerto Rico Department of State. In addition, a merchant’s registration certificate (“Registro de Comerciante”) is required from the Puerto Rico Department of Treasury (Hacienda). This allows proper identification for sales tax collection and other fiscal reporting obligations.
| Requirement | Description |
|---|---|
| Register Business Name | Puerto Rico Department of State |
| Obtain Merchant’s Registration Certificate | Puerto Rico Department of Treasury (Hacienda) |
Taxation of Sole Proprietors in Puerto Rico (2025)
For tax purposes, a sole proprietor’s business income is reported on their personal tax return. There is no corporate tax; instead, the net income is subject to Puerto Rico’s individual income tax rates, which are progressive. Sole proprietors are also obligated to pay self-employment taxes, including Social Security and Medicare contributions. If a business activity is taxable, Sales and Use Tax (IVU) applies as well.
| Tax Type | Description / Rate (2025) |
|---|---|
| Individual Income Tax | Progressive rates from 0% to 33% of net income |
| Sales and Use Tax (IVU) | Applies to taxable sales and services (refer to Hacienda for latest) |
| Self-Employment Tax | Social Security and Medicare contributions per current rates |
Key Conditions and Practicalities
Sole proprietorship is accessible to regular citizens and widely used in practice. The structure does not require a separate entity formation, maximizing administrative simplicity and flexibility. However, personal and business finances are not legally separated, so the proprietor assumes all legal responsibility for business obligations.
Summary Table: Sole Proprietorship Status in Puerto Rico
| Feature | Details |
|---|---|
| Status Name | Sole Proprietorship (Propietario Único) |
| Legal Entity Required? | No |
| Business Name Registration | Required with Puerto Rico Department of State |
| Merchant Registration Certificate | Required from Puerto Rico Department of Treasury (Hacienda) |
| Tax Filing | On individual personal tax return |
| Applicable Taxes | Individual income tax, sales and use tax (IVU), self-employment tax |
| Progressive Income Tax Rate (2025) | 0% – 33% |
| Most Common Users | Small business owners, freelancers |
Official Resources
- Puerto Rico Department of State
- Puerto Rico Department of Treasury (Hacienda)
- Puerto Rico Government
Pro Tips for Setting Up a Sole Proprietorship in Puerto Rico
- Complete your business name registration early to avoid delays when opening a business bank account or invoicing clients.
- Be sure to secure your merchant’s registration certificate from Hacienda before engaging in any taxable sales or services.
- Carefully track all business income and expenses, since your net profit will be taxed progressively up to 33%.
- Monitor any changes to IVU (Sales and Use Tax) rates, as these can affect both pricing and compliance obligations.
- Keep personal and business finances separate, even if not required, to simplify tax reporting and manage liability risks.
Sole proprietorship remains the dominant structure for freelancers and small-scale businesses in Puerto Rico. Simple registration and reporting requirements make it a practical option, but owners should be mindful of progressive income tax rates and maintain rigorous recordkeeping. For anyone operating individually, staying compliant with name and merchant registration is essential, as is understanding the personal liability inherent in this structure.