Do you need an LLC? Probably not.
No. You. Don't.
At least most of you don't. Not yet.
If you're a sole proprietor netting under about $80,000 a year and you carry good insurance, an LLC probably isn't doing much for you. Social media says otherwise. Here's why, and here's when an LLC actually becomes worth it.
Who's telling you that you need one
Social media says you need an LLC. Because they want to sell you the service of creating one for you.
Then they leave you hanging. Nobody explains what it takes to finish the job. Nobody tells you which tax return you'll file, what it costs to keep the thing running, or that there's actual work after the filing fee clears.
But mostly, they want you to question yourself. To always think you need something more. You're not aware of something. You're lacking. Question yourself. They want you to pay for the next thing.
And the next thing is usually fixing the mistakes after they screwed you into an LLC.
A single-member LLC is "disregarded." Read that word again.
So here's the deal. If you form a single-member LLC and do nothing else, the IRS treats it as a disregarded entity.
That means, shocker, it's disregarded. For federal income tax, it's like it doesn't exist. Your business income still lands on Schedule C of your personal return, the same place it went when you were a sole proprietor. You still pay self-employment tax on your profit, same as before.
Now, tell me why you need that.
You probably don't.
To be precise: "disregarded" is about income tax. The LLC is still a real company under state law, and the IRS treats it as a separate entity for employment taxes and certain excise taxes. So once you have employees, it matters. For the one-person shop, your tax return looks the same.
What does change is your to-do list. In North Dakota, it costs $135 to file the Articles of Organization, and every LLC files an annual report with the Secretary of State by November 15 for $50. Miss it by more than six months and the state can terminate your LLC. You need a registered agent, an operating agreement, and a separate bank account you actually keep separate. None of that comes up in the 60-second video.
"But I need liability protection"
You can get a lot of that from a good insurance policy. General liability, professional liability, whatever fits your work. Talk to your insurance agent before you talk to an LLC formation website.
Here's what nobody mentions: an LLC only protects you if you operate it like a separate company. Mix the money, pay for groceries out of the business account, skip the paperwork, and a court can decide that you and the LLC are the same person. That's called piercing the veil, and when it happens, the protection you paid for is gone.
An LLC also doesn't shield you from your own work. If you personally make the mistake, you can be personally on the hook. That's what insurance is for.
So an LLC you don't keep clean isn't worth it either.
So when is it worth it?
Two situations.
1. You're ready to make an S election
An LLC can elect to be taxed as an S corporation by filing Form 2553 with the IRS. Then it isn't disregarded anymore. It functions as an S corp for tax purposes, and now the LLC is worth it.
So when do you need an S corp? When you're NETTING around $80,000.
People will say gross income. Let's be real. You need to be netting a solid amount before you elect S. Here's why: an S corporation has to pay you reasonable compensation, through payroll, for the work you do before it can pay you distributions. That net income needs to cover your reasonable compensation. Add payroll taxes, a separate business tax return, payroll filings, and higher prep fees. If you don't have the net income to cover all of that and still come out ahead, it ain't worth it.
The $80,000 is my rule of thumb from doing this work. The IRS doesn't publish a number. Your number depends on your industry, what a reasonable wage looks like for the work you do, and your state. That's a conversation with an adviser who has seen your books.
Timing matters too. Form 2553 generally has to be filed no more than 2 months and 15 days after the start of the tax year you want it to apply to. For most calendar-year businesses, that's March 15.
2. You're bringing in a partner
If you're having a partner in your business, a multi-member LLC is treated as a partnership by default. That gives you a legal structure for who owns what, who gets paid what, and what happens when someone wants out. Get that written down before it becomes a fight. That's a real reason to form an LLC.
LLC doesn't mean incorporated
This one drives me nuts.
LLC stands for Limited Liability Company. The word "corporation" isn't in there. Forming one doesn't make you incorporated, and it doesn't make you a corporation for taxes.
And yes, you still receive 1099s as an LLC. Payments to corporations, including LLCs that have elected S corp or C corp treatment, are generally exempt from 1099-NEC reporting, with exceptions like legal and medical payments. A single-member LLC that hasn't elected anything checks the same box on a W-9 as a sole proprietor. So until you elect corporate tax treatment, the 1099s keep coming.
One update while we're here: for payments made in 2026 and after, the 1099-NEC reporting threshold went from $600 to $2,000. You may see fewer 1099s for small jobs. You still owe tax on every dollar, with or without the form.
So, do you need an LLC?
Probably not, if you're a sole proprietor netting less than $80,000, with good insurance.
What you really need is a good adviser. Not the internet.
But be prepared to pay. And be prepared to level up your records, your processes, and your mindset. Most good advisers don't play down. That's why you can't find them in your spaces online. They're waiting for you to level up and be ready for more, and for real advising.
They won't put up with lies in your books. Avoidance. No communication. Panicking at the deadline. Cheaping out on your monthly accounting.
We can't advise if we don't know your numbers.
The internet will sell you an LLC.
A good adviser will tell you when you're ready for one.
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This is general information, not tax or legal advice for your situation. Entity decisions depend on your numbers, your state, and your risk. Talk to your adviser before you file anything.
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