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Do I need an LLC to start a small business?

Updated By ProfitDrawer

Short answer

No. The SBA says you are automatically a sole proprietorship if you do business without registering another structure, and if you work under your own legal name you won't need to register anywhere. An LLC is optional: it protects you from personal liability in most instances, but costs a state filing fee, often part of a registration total under $300. ProfitDrawer's startup guides note that many cleaners and lawn care owners start as sole proprietors.

Without an LLC (sole proprietorship):

  • Starts automatically when you begin doing business.
  • You can be held personally liable for the business's debts and obligations.
  • Profit is reported on your personal return and you pay self-employment tax.

With an LLC:

  • You register with your state, and need a registered agent before you file.
  • Protects your personal assets in most instances.
  • Profits and losses can pass through to your personal income without corporate tax.
  • Members are still considered self-employed and pay self-employment tax.

Fees vary by state and business structure; some states also charge yearly report fees. If you use a business name that is not your legal name, most states require you to register it as a DBA, which gives no legal protection on its own.

Many owners start as sole proprietors, carry business insurance, and form an LLC later as the business grows or takes on more risk. Compare your state's fees and ask a local attorney or accountant if you are unsure. General information, not legal advice.

Source: Choose a business structure (U.S. Small Business Administration) · Updated

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General information, not tax, legal or financial advice. Check the rules for your state and your situation.