Form your LLC: $99 + state fee
One flat service fee in all 50 states and DC. The state's own fee is passed through at cost and shown before you pay.
Start your LLCWhat's included
- Name availability check before we file
- Articles of organization prepared and filed
- Submitted within 3 business days, or same day for +$50
- Approved documents emailed, plus a private order page
- Your state's after-formation deadlines in writing
- A real person by email and phone
Every state also accepts filings directly from owners, for the state fee alone.
If you sell anything on your own and haven't registered a company, you are already a sole proprietor. There is nothing to file: the business is you. An LLC is a separate legal entity you create with a state filing. The question is not which one is better in general, but whether the protection and structure of an LLC are worth its cost and paperwork for your business right now.
At a glance
| Sole proprietorship | LLC | |
|---|---|---|
| How it starts | Automatically, when you start doing business | A filing with the state |
| Legal identity | You and the business are the same person | A separate entity that you own |
| Personal liability | Your personal assets are exposed to business debts and claims | Can help keep business debts and claims away from personal assets |
| Default federal tax | Profit reported on your personal return | Single-member: same as a sole proprietor. Multi-member: partnership return |
| Tax options | None beyond the default | Can elect to be taxed as an S corporation or C corporation |
| State cost to start | Nothing, or a trade-name (DBA) fee | $35 to $500, median $100 |
| Ongoing state paperwork | Usually none beyond licenses | Annual or biennial report in most states |
| Owners | Exactly one | One or more |
Liability: the main reason people form an LLC
As a sole proprietor, the business's debts are your debts. If a customer sues, or a lease goes bad, or a supplier isn't paid, the claim can reach your savings, your car, and in some cases your home.
An LLC puts a legal wall between the business and you. Claims against the company generally stay with the company's assets. The wall has known gaps, and it helps to know them going in:
- Your own actions. If you personally injure someone or commit professional malpractice, you can be liable regardless of the LLC.
- Personal guarantees. Landlords and lenders often ask small-business owners to guarantee a lease or loan personally. A guarantee goes around the LLC.
- Mixing money. Paying personal bills from the business account, or running business income through your personal account, gives a court reason to treat the LLC and you as one. A separate bank account and an operating agreement help show they are separate.
Insurance and an LLC solve different problems. Many owners carry general liability insurance whichever structure they choose.
Taxes: often the same, with more options
A single-member LLC is taxed the same way as a sole proprietorship by default: the IRS disregards the entity, and profit flows onto your personal return with self-employment tax. Forming an LLC does not, on its own, lower or raise your federal tax.
What changes is the menu. An LLC can elect to be taxed as an S corporation, which some owners use once profits are high enough that paying themselves a salary and taking the rest as distributions saves self-employment tax. That election brings payroll and a separate tax return, so it is a conversation for an accountant, not a default. A multi-member LLC is taxed as a partnership unless it elects otherwise. State taxes vary; a few states charge LLCs a tax or fee that sole proprietors don't pay.
Cost and paperwork
A sole proprietorship costs nothing to start. If you use a business name other than your own, most states or counties want a trade-name (DBA) registration, and some lines of work need licenses either way.
An LLC costs a state filing fee, from $35 in Montana to $500 in Massachusetts, and in most states a recurring report. 6 states have no recurring LLC report at all. You will also want a separate bank account, an EIN (free from the IRS), and an operating agreement. See LLC cost by state for every state's numbers.
Decided on an LLC?
We file it in any state for $99 plus the state fee at cost.
When staying a sole proprietor is reasonable
- You are testing an idea and haven't made consistent sales yet.
- Your work carries little risk of claims, and you have few assets to protect.
- You have no co-owners, employees, leases, or loans.
Signs it's time to form an LLC
- You sign contracts, leases, or take on business debt.
- Customers could plausibly sue over your product, service, or premises.
- You are taking on a partner or co-owner.
- You want a business bank account, business credit, or a more established presence with clients.
- Your profit is growing and you want the option of S corporation tax treatment later.
Switching from sole proprietor to LLC
There is no conversion form. You form the LLC, get an EIN for it, open its bank account, and move the business into it: update contracts, invoices, payment processors, and licenses to the LLC's name. Close out any DBA you no longer need. Our step-by-step guide covers the filing, and what to do after forming your LLC covers the move.
File it yourself or have us do it
You can form an LLC directly with your state for the state fee alone; every state takes the filing from owners. Our service adds $99 to check the name, prepare and submit the filing, and send you the approved documents and the state's next deadlines.
General information, not legal or tax advice. For tax elections in particular, talk to an accountant about your numbers.
Frequently asked questions
Is an LLC better than a sole proprietorship?+
Not automatically. An LLC can help protect personal assets and adds tax options, but it costs a state fee and adds paperwork. It tends to make sense once you sign contracts, take on risk, add a co-owner, or build meaningful profit.
Do I pay more tax as an LLC?+
By default, no. A single-member LLC is taxed like a sole proprietorship. Some states charge LLCs a fee or tax, and an LLC can choose S corporation treatment, which changes the picture; ask an accountant.
Can a sole proprietor have employees?+
Yes. A sole proprietor can hire employees, but needs an EIN and payroll registration to do it, and the owner remains personally liable for business obligations.
Can I convert my sole proprietorship to an LLC?+
Yes, by forming a new LLC and moving the business into it: a new EIN, a new bank account, and contracts and licenses updated to the LLC's name.