If you’re a solo designer, one of the biggest steps in turning your passion into a real business is deciding how to structure it. You’ve probably heard terms like LLC and sole proprietor thrown around. But which one is right for you?
In this guide, we’ll break down the key differences between an LLC and a sole proprietorship, the pros and cons of each, and how to make the right choice for your design business in 2025. Whether you’re freelancing on the side or going full-time, this decision matters.
Why Business Structure Matters for Designers
As a designer, you’re not just creating logos or websites. You’re running a business. And how you structure it affects your taxes, your legal protection, and your growth potential.
Your structure shows clients you take your work seriously. It also protects you in case of client disputes or financial issues. Plus, it makes things cleaner when it comes to taxes, banking, and getting paid. Let’s look at your two main options: sole proprietorship or LLC.
What Is a Sole Proprietor?
A sole proprietor is the default business setup. If you start working for clients and get paid under your name, you’re already a sole proprietor. There’s no paperwork to file at the state level. It’s fast, free, and simple.
But that simplicity comes with some downsides. As a sole proprietor, there’s no legal separation between you and your business. If a client sues you or you run into debt, your personal assets are on the line. Also, you might miss out on certain tax benefits or funding options that only come with more formal business structures.
What Is an LLC?
An LLC, or Limited Liability Company, is a legal business structure that protects your personal assets. If something goes wrong in your business, your personal bank account, home, or car is safe. The LLC is treated as its own entity.
You also get more credibility. Clients are more likely to trust and hire you when they see a business name with “LLC” at the end. It shows you’re established and professional.
Forming an LLC takes a bit more effort and money, but it’s a one-time setup in most cases. Many states charge between $50 and $300 to file, and you can get help from services like Northwest Registered Agent or LegalZoom to make the process smooth.
Key Differences Between LLC and Sole Proprietor
When a Sole Proprietorship Works
If you’re just testing the waters or only working with one or two clients on the side, staying a sole proprietor might make sense for now. There’s no extra cost, and you can keep things simple. But if you’re making over $5,000 a month, working with corporate clients, or investing in software, marketing, or a team, it’s time to level up.
Why Most Designers Eventually Switch to an LLC
An LLC gives you protection and peace of mind. As your income grows and your brand gets more exposure, you don’t want a mistake or a bad client to put your personal finances at risk.
You also get more options with taxes. With an LLC, you can stay taxed like a sole proprietor, or later switch to an S-Corp if it helps you save on self-employment taxes. That flexibility can add up to thousands saved each year. And when it comes to long-term growth, such as launching a course, building a team, or applying for funding, having an LLC makes that process a lot easier.
How to Form an LLC in 3 Easy Steps
1. Pick Your State
You can form your LLC in your home state. Most designers don’t need to go out of state unless there are big tax differences.
2. File Articles of Organization
This is the form that makes your LLC official. You file it with your Secretary of State and pay the one-time fee.
3. Get an EIN and Business Bank Account
Your EIN is a tax ID number from the IRS. Once you have it, open a business checking account to keep your finances separate. This step is crucial for protecting your LLC status.
You can do it all yourself or use a service to save time and avoid mistakes. We recommend Northwest Registered Agent if you want a smooth experience with great support.
- Special $39 pricing to form your company
- Well-established and trusted service
- Includes free registered agent service for 1 year ($125 value)
- Privacy is guaranteed so your info stays off public records
- Fast filing and processing times
BEST OVERALL FOR BUSINESS FORMATION
And if you’re ready to start your LLC, check out our free step-by-step state guides here:
What About Branding and Design Portfolios?
One benefit of forming an LLC is that you can run your business under a custom name. Instead of sending invoices as “Jane Smith”, you can send them as “Smith Creative Studio LLC”. That looks better and feels more professional to clients.
You can also register a domain name, create an email address like hello@smithcreativestudio.com, and make your portfolio match your brand identity. This makes your whole client experience feel more high-end and lets you raise your rates over time.
Final Thoughts
If you’re serious about turning your design skills into a long-term business, forming an LLC is a smart move. It protects you legally, makes your brand more professional, and sets you up for growth. A sole proprietorship can work if you’re just starting, but as soon as you gain momentum, the LLC gives you the structure to scale without worry.
