Guides / Set up right
Sole proprietor or LLC?
Many freelancers start as sole proprietors. An LLC adds some separation.
If you freelance under your own name without forming anything, you're usually a sole proprietor. Some people form an LLC for legal separation or professionalism. Each has trade-offs.
Sole proprietor
- No setup needed in most places (local licenses may apply)
- Business income goes on your personal tax return
- No legal separation between you and the business
Single-member LLC
- Formed with your state, with fees that vary
- For federal taxes, usually treated like a sole proprietorship unless you choose otherwise
- Can offer some liability separation, if run properly
Ask a professional
The right choice depends on your work, state and income. A tax professional or attorney can help.
General information, not legal or tax advice. Pocket Change Pros isn't paid by any bank, software company or tax service.