This is general information, not legal or tax advice. Choosing a business structure has legal and tax consequences, and fees and rules vary by state. Confirm requirements with your state and consult a licensed attorney or accountant about your specific situation.Last reviewed: June 2026
No, you do not need an LLC to sell crafts. You can start as a sole proprietor with zero paperwork and report on Schedule C. People form an LLC for one main reason: personal liability protection, separating your personal assets from business debts and lawsuits. It does not lower your taxes by default, and it is not a substitute for insurance. Weigh the protection against the state filing and annual fees.
When you start selling, you are automatically a sole proprietor. There is nothing to file and no fee, but you and the business are legally the same, so a lawsuit or unpaid business debt can reach your personal savings, car, or home. An LLC is a separate legal entity. Run it properly, with separate business finances, and it generally limits a creditor or claimant to the business's assets rather than yours. That asset protection is the core reason to form one.
A single-member LLC is a "disregarded entity" for federal taxes by default, which means the IRS treats it just like a sole proprietorship: you still file Schedule C and still owe self-employment tax. Forming an LLC, on its own, does not cut your tax bill. The tax savings people talk about come from electing S-corp taxation, which only tends to pay off at higher, steady profit and brings payroll, a separate return, and more cost. For what you can actually deduct either way, see our craft business tax deductions guide.
These solve different problems. An LLC decides which assets are at risk if something goes wrong; liability insurance pays the claim when it does. An LLC will not write a check to an injured customer, and insurance will not stop a creditor from reaching personal assets in a sole proprietorship. Many vendors carry both. Our craft vendor insurance guide covers the coverage side.
There is no universal answer, but a few rules of thumb: a brand-new seller doing a couple of shows a year often starts as a sole proprietor (optionally with insurance) and forms an LLC later as sales and risk grow. Sellers with meaningful personal assets to protect, higher sales, or products with real injury risk lean toward forming sooner. The honest cost-benefit is asset protection versus the state filing fee plus any annual fee.
You can file directly with your state, which is the cheapest route, or use a formation service for convenience. Either way the state fee is the same. If you only want a business name without forming an entity, a sole proprietor can register a DBA instead.
No. You can sell crafts as a sole proprietor with no paperwork and no fee, reporting income on Schedule C. An LLC is optional. People form one mainly for personal liability protection, not because the law requires it to sell.
A sole proprietorship is the automatic default when you start selling: you and the business are the same legal entity, so your personal assets are exposed if the business is sued or owes money. An LLC is a separate legal entity that, if you keep finances separate and run it properly, shields your personal assets from most business debts and lawsuits.
Usually not by itself. A single-member LLC is a 'disregarded entity' by default, so you still report on Schedule C and still pay self-employment tax exactly like a sole proprietor. The potential tax savings people mention come from electing S-corp taxation, which generally only makes sense at higher, steady profit and adds payroll and paperwork.
No, and one is not a replacement for the other. An LLC limits which assets are at risk; liability insurance pays the claim. Many vendors carry both: the LLC for asset protection and a liability policy to actually cover an incident. See our craft vendor insurance guide for coverage details.
The state filing fee ranges from roughly $40 to $500 depending on the state. Many states also charge an annual report fee or franchise tax (California's is $800 a year, for example), so factor in the ongoing cost, not just the setup. Check your state's requirements before deciding.
A sole proprietor with no employees can usually just use their Social Security number, but an EIN is free from the IRS and lets you avoid putting your SSN on forms. An LLC commonly gets an EIN. Either way, getting one costs nothing and takes minutes on the IRS site.
Yes. A sole proprietor can register a DBA ('doing business as') to operate under a business name without forming an LLC. A DBA is just a name registration, though, so it does not provide the liability protection an LLC does.
Yes. An LLC is a business structure; it does not replace the seller's permit or sales tax registration your state requires to sell at fairs. See our state vendor permit guides for what your state requires.
Sort your state permit and sales tax rules, see what you can write off at tax time, and browse upcoming craft fairs to plan your season.
Last reviewed: June 2026. Fees and rules change and vary by state, so confirm with your state and the IRS links above. Spotted something out of date?