Choosing a Business Structure: Sole Proprietor, LLC, or S-Corp?

If you’re selling handmade jewelry, laser creations, or other products—even just a few here and there—you technically already have a business. But if you’re making consistent sales, it might be time to learn about business structures and what they could mean for your future.

📌 Please Note: Your business structure affects your taxes, legal protection, and paperwork requirements. This is a general overview of common structures for small businesses. Always consult a CPA or business advisor before making decisions.

Sole Proprietorship – The Easiest Start

• ✔️ No setup required—if you sell without registering a business, you’re automatically a sole proprietor
• ✔️ Simpler taxes, report profits on your personal tax return
• ❌ No legal separation—if the business owes money, so do you
• ❌ Harder to get business loans

Could be best for: Hobbyists or those just testing out their business idea

LLC (Limited Liability Company) – A Step Up

• ✔️ Protects your personal assets—can keep your house, car, and savings separate from business debts
• ✔️ Still relatively easy to manage
• ❌ Costs more than a sole proprietorship to set up
• ❌ If taxed as a sole proprietorship, all profit (after expenses) is fully taxed

Could be best for: Small business owners who want personal asset protection with less paperwork

S-Corp – A Tax-Saving Strategy for LLCs & Corporations

• ✔️ Can reduce self-employment taxes if your profit is high enough
• ✔️ Protects personal assets like an LLC
• ✔️ May be good for businesses with steady profits
• ❌ Requires payroll setup & more paperwork
• ❌ Doesn’t always save money—depends on how much profit you make

Could be best for: Business owners earning consistent profits who are ready to handle payroll

So, Which One Might Be Right for You?

Just starting? Many creative businesses begin as sole proprietorships—it’s the simplest and fastest option. But if you’re growing and want legal protection, forming an LLC might give you peace of mind.

Seeing steady profits? Some makers and laser business owners elect S-Corp taxation for their LLC once they’re earning enough to benefit from reduced self-employment taxes.

Because your business structure impacts your taxes, liability, and long-term growth, it’s worth speaking with a CPA to figure out the best route for you.

📌 Disclaimer: This post is for educational purposes only and is not legal, tax, or financial advice. Always consult a CPA or business professional before making business decisions.

Source: SBA.gov Business Guide

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➡️ Want to chat with other makers about running a small business? Join us in the Monarch Pine Craft Supply Insiders Facebook group for more tips and community support.