[valar_m]

>> You definitely don't need to form an LLC. I'm still a sole proprietor all this time and it's working out fine.

This is bad advice. It has worked out for you so far because, I'm willing to guess, you have not been put at risk for any sort of substantial liability.

Forming an LLC creates a separate legal entity which is itself responsible for its own debts and liabilities. It isn't expensive or difficult to form an LLC, and you don't need a lawyer to do it. For most US states, it's a short form and an online payment.

There are some important rules to follow to ensure that your LLC will be viewed by the courts as a separate entity from yourself in the event that some potential liability arises. Perhaps the most important rules is to separate the finances of the LLC from your own personal finances. It's easy to open a checking account for your LLC - someone at your bank can help you do it. When clients pay you, make sure the check is written to your LLC, not you. Pay yourself from the LLC account - don't use the LLC's debit card for personal purchases and expenses. The goal is to create a clear line of separation from yourself and the LLC so that if someone sues, liability stops at the LLC and does not extend to your personal assets.

[jwr]

Much of the advice given in this thread should be qualified with "at least in the US". For example, the liability problems are much less of an issue in the EU, and forming an LLC equivalent in most countries will not protect you from liability if you are the sole owner and you manage the company.

[fastball]

Personal liability is absolutely still an issue in the EU as well.

[ido]

But will the same solution protect you?

When I was considering it here in Germany my tax advisor told me a UG[0] will mean a lot more bookkeeping and associated higher costs compared to remaining a sole proprietorship & that it will practically not likely to have any benefit in my case[1].

I can imagine less bureaucratic countries like the US & UK impose less of an overhead tho. For the life of me I can't understand why the German authorities are so resistant to entrepreneurship.

[0] https://en.wikipedia.org/wiki/Entrepreneurial_company_(Germa...

[1] I was doing game development consulting for various small companies, something I guess is unlikely to really get me sued?

[ownagefool]

In the UK you want the Ltd.

Sure, if you destroy a customers data on purpose, limited liability isn't going to help you. For a mistake, an Ltd with insurance is what you want.

If you're dealing with any reasonble amount of money, such as £40k+ per year, it's also more tax efficient.

[ido]

It’s less tax efficient in Germany until a much higher threshold

[jwr]

"Personal liability" is an overly broad term. In the EU a single baseless lawsuit does not bankrupt you, so if you feel you have your finances under control, it might turn out that sole proprietorship is not a problem at all.

This is what I meant by "liability problems are much less of an issue in the EU".