LLC vs sole proprietorship: the cost comparison
A sole proprietorship is the default — it exists the moment you start doing business, with no state filing at all. An LLC is the same owner wearing a state-created legal shell. This page compares what each structure costs; the liability and tax rules that should drive the choice are summarised, but the decision itself deserves professional advice for your situation.
| Cost item | Sole proprietorship | Single-member LLC |
|---|---|---|
| State formation filing | $0 — no filing exists | $35–$500 depending on state (Articles of Organization) |
| DBA / trade name registration | Often required to operate under a business name; typically a county or state filing in the ~$10–$60 range depending on jurisdiction | Not needed for the LLC’s own legal name; a DBA is only for operating under a different name |
| Annual state charges | $0 (licences/permits aside) | $0–$500 report fee, plus franchise/minimum tax in CA ($800), DE ($300–$400), RI ($400), KY ($175 min), TN (per-member) |
| EIN | Free from the IRS (or use your SSN where allowed) | Free from the IRS |
| Federal tax filing | Schedule C with your personal return | Schedule C with your personal return — a single-member LLC is taxed identically by default (“disregarded entity”) |
| Self-employment tax | 15.3% on net earnings | 15.3% on net earnings — the LLC alone changes nothing here |
| Registered agent | Not applicable | $0 as your own agent; ~$100–$300/yr for a service |
DBA fees are set by individual counties and states and vary too much for a single national figure; the range shown is the commonly published one in formation roundups — check your county clerk for the exact fee.
The cost story in one paragraph
On taxes, the two structures are twins: a single-member LLC files the same Schedule C and pays the same self-employment tax as a sole proprietor. So the LLC premium — the filing fee plus whatever your state charges annually — buys exactly one thing: limited liability separation between you and the business, plus the credibility and banking separation that come with a registered entity. In a $0-ongoing state (Arizona, Ohio, New Mexico…), that premium is a one-time $50–$99. In California it is $800 every year. Whether the protection is worth the premium depends on your risk: contracts, employees, customer-facing premises, and personal assets all push toward the LLC; a low-risk side activity with good insurance pushes the other way.
What will the LLC cost in your state?
Pick your state in the calculator and see the filing fee, the annual charges, and the five-year picture before you decide: Open the LLC cost calculator →
Costs people forget on the sole-proprietor side
- DBA renewal: many jurisdictions expire trade-name registrations (commonly every 5 years) with a renewal fee.
- Business licences and permits apply to both structures equally — they are not an LLC-only cost.
- Insurance: a sole proprietor whose work carries real liability risk often ends up buying the protection an LLC would have complemented — compare total cost of risk, not just state fees.
- Switching later is not free: forming an LLC after the business has contracts, accounts, and a name means re-papering all of them; the state fee is the smallest part of a late conversion.
Educational information only. LLC Cost Guide is not a law firm, accounting firm, or filing service, and nothing on this page is legal or tax advice. Fees and deadlines change; confirm the current figures with your Secretary of State (or Division of Corporations) before filing, and consult a licensed attorney or CPA for advice about your specific situation.