An LLC is the most popular business structure in America for good reason — but it isn't free or automatic tax savings. Here are the real advantages and drawbacks.
An LLC separates your personal assets from your business. If the business is sued or owes debts, your home and savings are generally protected. For any business with customers, contracts or risk, that protection alone is usually worth the cost.
By default an LLC is taxed exactly like a sole proprietor — it doesn't lower your taxes on its own. The savings come later if you elect S-corp status once profit is high enough. See whether that applies to you in the LLC vs sole proprietor calculator and estimate your bill with the LLC tax calculator.
Every state charges a filing fee ($35–$500) and many add an annual report or franchise fee. California's $800 minimum franchise tax is the famous one. Check your state's true first-year cost in the LLC cost calculator.
If you have any liability exposure, partners, or plan to grow, an LLC is usually worth it. If you're a hobby-level side hustle with no risk, you may not need one yet. When you're ready, follow the step-by-step guide.