Sole proprietorship vs LLC for independent contractors
Independent contractor? Compare sole proprietorship and LLC on liability, taxes, 1099s, cost and paperwork.
As an independent contractor you're a sole proprietor by default, and clients report payments on Form 1099-NEC either way. The choice comes down to liability, cost and convenience.
| Factor | Sole proprietorship | LLC |
|---|---|---|
| Cost | $0 state fee | State filing + annual fee (by state) |
| 1099s | Your name and SSN or EIN | The LLC's name and EIN |
| Self-employment tax | Yes | Yes by default |
| Liability for business debts | Personal | Generally limited |
| Paperwork | Minimal | Annual report; separate bank account essential |
Tip: even as a sole proprietor you can get a free EIN so you don't give every client your SSN (IRS).
General information, not legal advice. Legal reviewer: to be added.
Sources
- IRS irs.gov
Checked 21 Oct 2026. Spotted an error? Tell us.
Update history
- : first published; figures checked against the sources listed.