LLC vs sole proprietor
Compare liability, taxes, cost, and admin to see which structure fits where you are today.
Roughly what you expect to keep after expenses.
This is general information, not legal or tax advice. Rules, fees, and tax treatment vary by state and change over time — verify with your Secretary of State and a qualified attorney or accountant before deciding.
Select your state and answer a few questions to see a side-by-side comparison.
Choosing between an LLC and a sole proprietorship
If you start working for yourself and do nothing, you're a sole proprietor by default — no filing, no fees, but no separation between you and the business. An LLC is a formal entity you register with your state; it generally protects your personal assets from business debts and lawsuits.
The right choice usually comes down to three things: how much liability risk your work carries, how much profit you expect, and whether you have more than one owner. The comparison above weighs those for your state.
Frequently asked questions
- What is the main difference between an LLC and a sole proprietorship?
- A sole proprietorship is the default when you start working for yourself — simple and free, but your personal assets are exposed to business debts. An LLC is a registered entity that generally shields your personal assets, at the cost of formation fees and some ongoing paperwork. This is general information, not legal advice.
- Do LLCs pay less tax than sole proprietors?
- Not automatically. By default an LLC is taxed the same way as a sole proprietorship (pass-through). The potential tax savings come later, if the LLC elects S-corp treatment, which can reduce self-employment tax at higher profit levels. Talk to an accountant about your situation.
- How much does it cost to form an LLC?
- It depends on your state — formation filing fees commonly range from about $40 to $500, and some states add annual report or franchise fees. This tool shows an approximate figure for your state; always verify current fees with your Secretary of State.
State fee data last reviewed 2026-01. This tool provides general information only and is not legal or tax advice.
Curious about the numbers side? The profit margin calculator helps you estimate the annual profit figure this comparison asks for.