Start with an LLC
For the vast majority of trade businesses, an LLC (limited liability company) is the right first move. It does the one thing that matters most on day one: it separates your personal assets — your house, your truck, your savings — from the business's liabilities. If a job goes wrong and you're sued, an LLC is the wall between the business and your family's net worth.
It's also fast and cheap. You file Articles of Organization with your state, pay the fee ($50 in some states, up to $500 in others), and you're done in a day or two. You don't need a lawyer for a single-owner LLC in most cases — the state's website walks you through it.
Do this before your first paid job. Operating as a sole proprietor "just for a few months" means every job in that window is exposed.
What you actually need to file
- A business name — check it's available on your Secretary of State's site.
- A registered agent — a person or service that receives legal mail. You can be your own in your home state, or pay a service $50–$150/year if you don't want your address public.
- An EIN — a free federal tax ID from the IRS (irs.gov, takes 5 minutes). You need it to open a business bank account and hire.
- An operating agreement — even as a solo owner, a one-page agreement makes the business look legitimate to banks and buyers later.
When the S-corp election makes sense
An S-corp isn't a different entity — it's a tax election you make on top of your LLC. Its advantage is payroll-tax savings: you pay yourself a "reasonable salary" (subject to the ~15.3% self-employment tax), and take the rest as distributions that aren't subject to that tax.
The catch is overhead: you have to run real payroll, file a separate business return, and pay for the accounting. Those costs (often $1.5K–$3K/year) eat the savings until your profit is high enough.
The rough rule of thumb: once your business nets somewhere around $60,000+ in profit above a reasonable salary, the S-corp election starts paying for itself. Below that, the LLC's simplicity usually wins.
You don't have to decide now. File the LLC, get to work, and revisit the S-corp election with your accountant once you have a year of real numbers. You can elect S-corp status later without re-forming the company.
The one mistake to avoid
Don't skip the entity and "sort it out at tax time." The protection only exists while the entity exists — it isn't retroactive. The 20 minutes you spend forming an LLC up front is the cheapest insurance you'll ever buy for the business.