I got a legal threat from a brand claiming my merchandise logo infringed on their trademark. They were suing for $50,000. I froze. I didn’t have $50,000. Then I remembered: I ran my business as a Sole Proprietorship. That meant they could come after my car, my personal savings, and my future wages. I wished I had that “LLC” after my name.
Key Takeaways
- The Corporate Veil: An LLC (Limited Liability Company) creates a legal wall. If the LLC is sued, they can generally only take the LLC’s assets (business bank account), not your personal house or car.
- Insurance Requires Entities: Many commercial insurance carriers prefer or require an LLC to issue a Business Owners Policy (BOP). It defines who they are insuring.
- Anonymity: In states like Wyoming, Delaware, or New Mexico, you can form an Anonymous LLC where your name does not appear on public records, protecting you from doxxing.
- Commingling Voids Protection: If you have an LLC but use the business card to buy groceries, a judge will “pierce the corporate veil” and say the LLC is fake, making you personally liable again.
The “Why” (The Trap): Sole Proprietorship Risk
By default, you are a Sole Proprietor. You and the business are the same person.
Trap 1: Unlimited Personal Liability. If someone slips at your meetup or sues you for defamation, they sue you.
Trap 2: Insurance Rejection. Some carriers view Sole Proprietors as “hobbyists” and refuse to write robust commercial policies.
Forming an LLC costs ~
100−100−
300 (depending on state) and is the cheapest “insurance” against total bankruptcy.
The Investigation: “I Called Them”
I tested the ease of forming an LLC for a creator.
1. ZenBusiness / LegalZoom
- The Experience: Very easy. “Gold” packages handle the filing and EIN.
- The Cost: ~$300 + State Fees.
- The Upsell: They try to sell you a registered agent service for $200/year.
2. Northwest Registered Agent
- The Experience: Best for privacy. They let you use their address on all forms so your home address never touches the public record.
- The Cost: ~$39 + State Fees + Agent Fee.
- My Analysis: Highly recommended for SWers to maintain privacy.
3. DIY (Secretary of State Website)
- The Experience: Going directly to the state website.
- The Cost: Just the filing fee (e.g., $50 in Colorado, $800 in California).
- The Risk: You have to put an address. You must use a Virtual Mailbox or Registered Agent, or your home address becomes public.
Comparison Table: Business Structures
| Feature | Sole Proprietorship | LLC | Anonymous LLC (WY/DE/NM) |
| Liability Protection | None | Yes (Business Assets only) | Yes |
| Privacy | Low (Name is public) | Medium | High (Name hidden) |
| Cost | $0 | $100 – $800/yr | $200 – $400/yr |
| Insurance Access | Limited | Full Access | Full Access |
Step-by-Step Action Plan
- Choose a “Boring” Name: Don’t name it “Hot Girl Content LLC.” Name it “Blue Sky Media Holdings LLC.” This looks professional on bank statements and leases.
- Hire a Registered Agent: Do this before you file. Use their address for everything.
- File Articles of Organization: Use a service like Northwest or do it via the state portal.
- Get an EIN: Instant and free on IRS.gov.
- Open a Business Bank Account: Take the Articles + EIN to a bank (online banks like Mercury or Relay are creator-friendly). Move all business money here.
FAQ
Q: Does an LLC save me money on taxes?
A: Not automatically. It’s a “pass-through” entity. However, if you elect “S-Corp” status later (once making $80k+), you can save on Self-Employment taxes. Ask a CPA.
Q: Do I need insurance if I have an LLC?
A: YES. The LLC protects your personal assets. Insurance protects the LLC’s assets. If the LLC gets sued and has no insurance, the business goes bankrupt and you lose your income stream.
Q: Can I form an LLC in Wyoming if I live in California?
A: Yes, but you will likely have to register it as a “Foreign LLC” in California and pay the CA franchise tax ($800) anyway. Consult a lawyer about “Foreign Qualification.”
[IMAGE: A diagram showing “You” -> “LLC Wall” -> “Lawsuit,” illustrating the assets protected behind the wall.]