Ask HN: LLC or Sole Proprietorship
I am wondering if anyone has advice on forming an LLC or operating my "side hustle" as a sole proprietorship. I will be launching a website in 2026, and I don't know if I will make $20 a year or $2,000, but I don't expect it to be much more than covering operating costs. The pricing model is free with an upgrade to premium for extra features. No ads.
What I've been reading online talks a lot about liability, insurance, and other issues that I do not foresee being relevant to running a website, but it sounds like an LLC mitigates those issues. It will cost me a few hundred dollars and quite a bit of time to set up an LLC... I could always start as a sole proprietor and then make the switch if I deem it necessary, so that's the option I'm leaning most towards.
I know plenty of folks on here have hobbies and small businesses or websites they try to monetize, so maybe you have an idea I haven't considered? Check and see what your state's "judgment-proof statutes" are, i.e. how much you can protect from garnishment/seizure, in the event that you lose a lawsuit (the entire reason to create an LLC would be to limit your personal liability — this often fails, particularly in situation where you could have been just a sole proprietorship). As an example, here in Tennessee, you may exempt $10,000 from seizure, plus $1900 in work tools (including computers). Therefore, if you have less than $11,900 in Tennessee, you are judgment proof. If you are judgment proof, there is no reason to create an LLC. In Texas, your entire homestead is exempt! Also, LLCs cannot represent themselves in court (i.e. require an attorney for litigation). You must also file quarterly taxes, tangible property taxes, &c. Dissolving the LLC costs way more money than creation. Really just an all-around pain in the buttocks. Src: Have worked individually as sole proprietor, LLC, and s-corp — the latter at least simplifies taxes. See also: <https://en.wikipedia.org/wiki/Piercing_the_corporate_veil> This helps, thanks for the insight. I've brushed up on the laws in my state, which aren't as generous as yours. I'll do a little more reading before I decide, but it appears that all the benefits/drawbacks revolve around getting sued.