Decide & Register
LLC vs Sole Proprietor: Which Should a Trades Owner Choose?
Short answer
Default to sole proprietor in year one if you have no employees and low liability work. Form an LLC the moment you have employees, expensive equipment, or do work that could damage property (trades, contractors, mobile services). An LLC protects your house from a business lawsuit.
This is the first real decision new owners agonize over. The truth: it's reversible, both are fine to start with, and the answer depends on liability exposure — not income.
Quick comparison
| Sole Proprietor | LLC |
|---|---|
| $0 to start, no filing | $50–$500 to file with state |
| Personal assets at risk | Personal assets shielded (if run properly) |
| Taxes on Schedule C | Taxes on Schedule C (single-member default) |
| No annual fees in most states | Annual report fees $50–$800/year |
| Hard to add partners later | Easy to add members or convert to S-Corp |
The liability test
- Do you enter customers' homes or property? → LLC
- Do you handle expensive customer property (vehicles, electronics)? → LLC
- Do you employ anyone, even part-time? → LLC
- Do you sign contracts over $5,000? → LLC
- None of the above? → Sole prop is fine to start
Frequently asked questions
Will an LLC save me on taxes?
No — a single-member LLC is taxed identically to a sole prop. Tax savings come from electing S-Corp status once you net $60K+, which is a separate decision.
Invoice from day one.
Glo Invoice is free for 14 days for new owners — your first invoice goes out in under 60 seconds.
Sources & further reading
Primary sources we consulted when writing and reviewing this guide.