A sole proprietorship is the simplest business structure – there’s no legal separation between you and the business, which means minimal paperwork but also personal liability for business debts and legal claims.
An LLC (limited liability company) creates a legal separation between personal and business assets, which can protect personal property like a home or car if the business faces debt or a lawsuit.
Sole proprietorships are easier and cheaper to set up, with fewer ongoing filing requirements, making them common for freelancers and very small, low-risk businesses.
LLCs involve more setup cost and paperwork, including state filing fees and often an annual report, but the liability protection becomes more valuable as a business takes on more risk, employees, or contracts.
Tax treatment varies by structure and location, so it’s worth speaking with an accountant about which option fits your specific business and state or country before registering.