I often get asked by a solo business owner whether it is worth the effort to create an LLC for their business.
The biggest reason that any business, solo owned or otherwise, should be run through a limited liability entity such as a limited liability company is for personal liability protection.
The costs to create and maintain a limited liability company is so low and the number of business related lawsuits are rising dramatically. Without an LLC, you are subjecting yourself and everything you own to risk of loss. Why do this?
You may start asking yourself- “well, who would ever sue me?” This is the famous question asked by the thousands of sole proprietors who have been sued and lose their home and personal assets every year. Lawsuits are about money. Once you have assets or your business starts to become successful, you become a higher risk target.
Instead of asking what the changes are of you ever getting sued (which is much higher than you think), analyze the costs to create and maintain an LLC for your business v. the potential loss if you do not.
Operationally, once you create an LLC, there is little difference in how you would run the business other than the fact that it will be the LLC who is the business entity. There are very little formalities and no legally required meetings or formal approvals.
From a tax perspective, there is no difference, a single member LLC is disregarded as a separate entity for federal income tax purposes only. You would file your business taxes
the same way as if you were a sole proprietor.