LLC vs sole proprietorship for online business

UPDATED: Sep 30, 2022

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

UPDATED: Sep 30, 2022Fact Checked

Get Legal Help Today

Compare Quotes From Top Companies and Save

secured lock Secured with SHA-256 Encryption

LLC vs sole proprietorship for online business

I sell hand knits through my etsy shop. I am currently structured as a sole proprietorship but I’m thinking of changing to an LLC to provide protection against lawsuits. Is this a good idea or could I accomplish the same thing by getting product liability insurance?

Asked on December 21, 2016 under Business Law, Pennsylvania


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

Do both. Having a limited liability company (LLC) will provide you with considerable (but not absolute) protection against many or most forms of company-based or -derived liability: e.g. for breaches of contract, from disatisfied customers, from company debts (unless you personally guaranteed them), etc. It does not protect you from debts, judgments or obligations based on things you *personally* do, like again, if you personally guaranty any obligations, or if you somehow personally injured or defamed someone in the course of working. So you also have insurance--to both protect you personally from liability where the LLC structure does not, and also to help protect the LLC, which is important to you (a source of income; something you have invested time, effort and presumably  money int; etc.).

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption