Quick definition of each
Both let you operate a business, but the protections are very different.
Sole Proprietor
The default. The moment you start earning money on your own, you're a sole prop. No paperwork, no separation between you and your business.
LLC (Limited Liability Company)
A separate legal entity from you. Your business has its own name, EIN, and bank account, and your personal assets are shielded from business liabilities.
Side-by-side comparison
What actually changes when you form an LLC:
- Liability protection: Sole prop = none. LLC = personal assets protected.
- Cost to start: Sole prop = $0. LLC = $40–$500 in state fees.
- Paperwork: Sole prop = none. LLC = annual report + operating agreement.
- Taxes: Identical for single-member LLCs by default — both file Schedule C.
- Credibility: LLC dramatically higher with banks, vendors, and clients.
- Business credit: Sole prop = stuck with personal credit. LLC = build separate business credit.
Want optional setup services?
Done-for-you technical setup is available as a separate service.
When a sole proprietorship is fine
Stay a sole prop if all of the following are true:
- You're testing an idea and earning under ~$10K/yr
- You don't have any physical risk (no clients in your home, no products that could harm someone)
- You don't need business loans or credit
- You're not hiring anyone
When you should form an LLC
Form an LLC if any of these apply:
- You have personal assets you want to protect (home, savings, car)
- You work with clients in person or have any product liability
- You want to build business credit and qualify for funding
- You plan to hire employees or contractors
- You're earning $20K+ and want to look more professional
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