I run Windi Web Design. I just filed an LLC for it — Missouri, took about an hour, $50 filing fee. Here's everything I learned along the way, including when not to bother filing. I'm not a lawyer. Use this as orientation, not legal advice.
What sole prop actually is
- The default state. If you started doing business under your own name (or a DBA) and never filed anything, you're a sole proprietor by definition.
- No formation paperwork required. Maybe a local business license depending on city.
- Taxes: business income flows through to your personal 1040 via Schedule C. No separate business tax return.
- Your personal assets are exposed if a client or anyone else sues you over the business. House, savings, car — all on the table in a worst-case scenario.
- Can scale to substantial revenue while still sole prop. There's no income threshold that forces you to incorporate.
What an LLC actually is
- A registered legal entity, separate from you personally.
- "Limited Liability" — your personal assets get a shield. With caveats (see myths below).
- Requires state filing fee + sometimes annual fees. Varies wildly by state — $50 in Missouri, $800/year in California.
- Default federal tax treatment for single-member LLCs: still Schedule C, just like sole prop. The IRS calls it a "disregarded entity."
- Can elect S-corp status later (when income justifies it) for potential tax savings.
- Adds a layer of professionalism — your business has a real legal name with "LLC" after it.
When to consider forming an LLC
The signal isn't a magic income number. It's any of these:
First contract worth $1k+
The size where someone could plausibly sue if it goes wrong. Liability shield starts to matter.
Sue-able exposure
You're doing work that could harm a customer (construction, food, professional advice, anything physical). Even small jobs.
First employee or contractor
Hiring someone introduces a whole new category of liability — payroll, classification, employment law.
Going broader with marketing
More strangers = more risk. The moment you start advertising, your blast radius grows.
The sniff test: "If something went wrong with this business, would I want my house at risk?" If the answer is no, it's time.
The cost comparison (Missouri example)
The 5-step filing path
Process is similar in most states. Missouri-specific details where relevant.
Pick a name
Search availability at your state's Secretary of State business database (free). Name must end in "LLC", "L.L.C.", "Limited Liability Company", or similar variant. Match availability to your domain — if "Acme LLC" is available but acme.com isn't, you have a branding problem to solve before filing.
Get a registered agent
The registered agent is the legal mail address for the LLC. Two options:
- Be your own registered agent (free) — your home address goes on public record
- Use a service ($100–150/yr) — Northwest Registered Agent is the standard recommendation. Privacy + scan/forward of legal mail. Worth it if you don't want your home address public.
File Articles of Organization
The state's online filing portal walks you through it. In Missouri: $50 filing fee, online, usually approved same day. The form asks for:
- LLC name
- Registered agent name + address
- Member-managed vs manager-managed (member-managed for solos)
- Purpose statement (broad: "any lawful business")
- Effective date (today or up to 90 days in the future)
Skip "expedited" upsells unless you have a deadline. Approval is usually fast either way.
Operating Agreement
Not required by most states for single-member LLCs (Missouri included), but write one anyway. The Operating Agreement is what actually preserves the liability shield in court — it documents that the LLC is a real, separate entity with its own rules, not just you in disguise.
For a single-member LLC, a 2-page template is fine. Free templates from Northwest Registered Agent or LegalZoom work.
EIN, bank account, insurance
The non-glamorous infrastructure that makes the LLC actually work:
- EIN — free from the IRS, takes 10 min online. You'll need it for the bank account and tax filings.
- Business bank account — separate from personal, full stop. Mercury and Relay are the easy online options for solo operators.
- Insurance — general liability + professional liability (E&O) for service businesses. Hiscox or Next Insurance, ~$30–60/mo.
Common myths
Myth: "An LLC saves on taxes."
By default, no. A single-member LLC is taxed exactly the same as sole prop — Schedule C, self-employment tax, the whole deal. Tax savings come from the optional S-corp election, which makes sense once your profit clears ~$60k/year. Below that, the S-corp accountant fees outweigh the savings.
Myth: "An LLC means I'm bulletproof."
No. You can still be personally liable for: your own bad acts (negligence, fraud), mixing personal and business finances, undercapitalizing the LLC, signing personal guarantees on business debts. The shield protects you from the LLC's general business liabilities — not your own conduct.
Myth: "I need to wait until I'm 'big enough'."
Many solo creatives form on day one — before risk has materialized. Forming early is cheap. Waiting until something goes wrong is expensive.
Myth: "Delaware/Wyoming LLCs are better for solo businesses."
Almost never. They're optimized for big-company tax structures. For a solo MO creative, forming in MO is cheaper, simpler, and avoids "foreign qualification" hassles.
When you DON'T need an LLC
- You make under $5k/year from this side gig and there's no liability exposure
- You have minimal customer interaction (selling digital products with clear terms, no bespoke work)
- You're freelancing through a platform that handles the contractual liability (Upwork, Fiverr handle most of this)
- You have an umbrella personal insurance policy that covers business activities (rare but exists)
Filing don'ts
- Don't pay LegalZoom $300+ to file. The state form is free to fill out and $50 to file. Most "LLC packages" are charging you $250 for a 30-min task.
- Don't pay for "LLC bundles" with stuff you don't need. Operating Agreement template = free. EIN = free direct from IRS. "Compliance kit" = useless paper.
- Don't skip the Operating Agreement just because it's not legally required. It's the document that holds up your liability shield in court.
- Don't co-mingle finances. Once the LLC is live, business stays in the business account. Period.
FAQ
How long does the LLC take to actually set up?
Half a day total if you're efficient. State filing: 1 hour. EIN: 10 min. Bank account: 30 min online. Operating Agreement: 30 min from a template. The rest is waiting on state approval (usually same day).
Do I need a lawyer to form one?
For a standard single-member LLC, no. State forms are designed for civilians. You might want a lawyer for: complex multi-member LLCs, partnership structures, or LLC-to-S-corp transitions where the tax stakes are real.
Can I form in Delaware or Wyoming for tax reasons?
For a solo Missouri-based business, no. You'd have to "foreign qualify" in Missouri anyway (and pay both states), so you'd have higher costs and more paperwork for zero benefit. Delaware/Wyoming makes sense for VC-backed startups, not solo service businesses.
What if I move states later?
You "foreign qualify" in your new state — register the existing LLC as authorized to do business there. Costs ~$100–200, doesn't unwind the LLC. Or you can dissolve and re-form in the new state. Talk to an accountant if it comes up.
Should I form before or after my first big contract?
Before, ideally — like 2–4 weeks before, so the LLC is live and the contract names the LLC as the counterparty. Forming after the contract is signed doesn't retroactively shield the work the LLC didn't exist for.