Guide
Sole Proprietor vs LLC: What’s the Difference?
Educational resource for small-business owners
A sole proprietorship is the default form for many individuals who conduct business without creating another legal entity. An LLC is a state-created legal structure with more formal registration and maintenance.
| Topic | Sole proprietor | LLC |
|---|---|---|
| Formation | Often begins automatically when an individual conducts business | Requires state formation filing |
| Legal separation | Generally not a separate legal entity from the owner | Designed as a separate legal entity under state law |
| Administration | Usually simpler | More formal records and state compliance |
| Tax | Commonly reported by the owner | Tax treatment depends on elections and number of owners |
Structure affects liability, taxes, financing, and paperwork. The SBA recommends choosing carefully and consulting business counselors, attorneys, and accountants when appropriate.
Official source
U.S. Small Business Administration – Choose a business structure
Important: This content is educational only and should not be treated as legal, accounting, or tax advice. Verify important requirements with official sources.