Form a single-member LLC and set it up for taxes

  1. Confirm a single-member LLC fits your situation
    30 min

    A single-member LLC separates your personal assets from business debts, but the IRS taxes it as a disregarded entity: profit flows straight onto your personal return on Schedule C, with the same self-employment tax as a sole proprietorship. This step ends in a go/no-go decision — make it before you spend the state filing fee.

    Sole proprietorshipSingle-member LLC
    LiabilityYou are personally liable for all business debts and lawsuitsThe LLC owns the debts; your personal assets are shielded, except for personal guarantees and your own negligence
    Self-employment tax15.3% on net profitThe same 15.3% — the LLC does not lower it
    PaperworkNothing to form; profit reported on Schedule COne formation filing with the state, then the same Schedule C
    Cost$0 to start$40–$500 state fee, plus annual-report or franchise fees in many states

    Write the decision on one line — “LLC — liability protection” or “sole proprietorship for now” — with today’s date. If the answer is go, nothing has cost money yet; the next steps only spend time until the filing fee is due.