If you are working for yourself, you are already a sole proprietor whether you registered anything or not. The question is whether to form an entity.
Sole proprietor
- No formation required — you are one by default.
- Simplest paperwork.
- Business income reported on your personal return.
- No legal separation between you and the business. Business debts and claims can reach your personal assets.
LLC
- Formed by filing with the state.
- Creates a legal separation between you and the business, which is the main reason people form one.
- That separation depends on actually keeping the business separate — separate bank account, separate records, no mixing.
- More paperwork and ongoing obligations.
- Tax treatment depends on how it is set up; forming an LLC does not by itself change how you are taxed.
The liability protection is not automatic and it is not permanent. Mixing personal and business money is the most common way people undermine it. Our note on separating business and personal finances covers that.
Signs an LLC is worth considering
- You have employees or subcontractors.
- Customers or clients could plausibly sue.
- You are signing contracts or leases.
- You have meaningful assets to protect.
- Clients require it before they will work with you.
We handle the formation
LLC formation is part of our general services, and we can talk through whether it fits your situation. Call (432) 257-7547 or come by 700 C Andrews Hwy in Midland. We work in English and Spanish.
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