Single-Member LLC vs Sole Proprietorship
The one-owner version of the LLC-versus-sole-prop choice: same tax flow, very different liability exposure, for a few hundred dollars a year.
For a single owner the tax result is the same either way — a single-member LLC is "disregarded" by default and reported on Schedule C just like a sole proprietorship. The difference is entirely about liability and perception.
| Dimension | Sole Proprietorship | Single-Member LLC |
|---|---|---|
| Liability protection | None — personal assets fully exposed. | Full separation — the LLC stands between you and business creditors. |
| Taxation | Pass-through on Schedule C, 15.3% self-employment tax. | Same pass-through treatment; S-Corp election available later. |
| Setup cost | About $0–$50. | $50–$500 filing plus annual franchise tax in many states. |
| Compliance burden | Minimal. | Low to moderate — annual report. |
| Equity & investor limits | One owner. | One member by definition, but can later add members. |
| Best for | A试探 side project with near-zero risk. | Any serious one-owner business worth protecting. |
Why most solo founders still form the LLC
The LLC costs a few hundred dollars a year but converts an unlimited personal liability into a bounded one, and it also lets you open accounts and sign contracts in a business name. For the price of a small annual fee, you remove the single biggest risk of going solo.
Note: This comparison is educational reference, not legal advice (非法律建议). Entity and tax rules differ by state — confirm with a licensed attorney in your state before choosing a structure.