This is not legal advice. For your specific situation, talk to a professional.
What a Sole Proprietorship Is
The simplest structure — no registration required; you default into it the moment you start doing business. The major downside: there's no legal separation between you and your business. If it gets sued, your personal assets are on the table.
What an LLC Is
A Limited Liability Company — a formal entity you register with your state. It creates legal separation, so a lawsuit is generally against the business, not you personally. This protection isn't absolute — it can be pierced if you mix personal and business finances.
The Other Differences
- Taxes: by default a single-member LLC is taxed like a sole proprietor. At higher income you can elect S-Corp status to reduce self-employment tax.
- Cost: LLCs cost money to set up; filing fees vary by state.
- Credibility: "LLC" after your name signals formality and legitimacy.
Which One Do You Need?
Consider starting as a sole proprietor if you're in very early validation with minimal revenue and liability risk. Consider an LLC if you're actively working with paying clients, your work involves giving advice or building things, or you have personal assets worth protecting.
Your legal structure is one of the first things we flag when you come into Your Business, Built — because we're not building on a foundation that isn't there. Take the quiz.