What is the difference between a single-member LLC and a sole proprietorship?

A single-member LLC and a sole proprietorship are taxed identically by default (both report on Schedule C), but they differ significantly in liability protection.

A sole proprietorship offers zero liability separation: your personal assets (home, savings, car) are exposed to business debts and lawsuits. A single-member LLC creates a legal barrier between your personal assets and business liabilities, provided you maintain proper separation (separate bank account, no commingling of funds). The LLC costs more to set up and maintain (state filing fees, annual reports, registered agent), while a sole proprietorship has no formation cost. For any business with liability risk (client work, physical products, employees), the LLC's protection justifies the additional cost. Lovie helps founders form single-member LLCs starting at $29.