Can I sell digital products without an LLC?

Yes. In the US you're a sole proprietor by default the moment you start selling — no registration required. You report the income on Schedule C of your personal tax return and pay self-employment tax (15.3%) on profit. Stripe, Paddle, Gumroad, and Lemon Squeezy all accept individual accounts, so no platform forces you to form a company first.

How much does it cost to form an LLC?

The state filing fee runs roughly $50–$500 depending on where you form — Arizona is around $50, Wyoming $100, California $70. The ongoing cost matters more: some states charge annually, and California's franchise tax is $800 a year while Delaware charges LLCs a flat $300 annual tax. Add a registered agent fee if you use a service.

Do Stripe and Paddle require a business entity?

No. Both let you sign up as an individual. The difference is what happens after: with Stripe you are the legal seller and sales tax compliance is your responsibility, while Paddle and Lemon Squeezy act as merchant of record — they're the legal seller and handle sales tax and VAT. That tax difference, not the entity question, is usually the bigger deal for a solo dev.

Does forming an LLC lower my taxes?

Not by itself. A single-member LLC is taxed exactly like a sole proprietorship by default — same Schedule C, same self-employment tax. Electing S-corp taxation can reduce self-employment tax once your profit is comfortably six figures, but that's a decision to make with an accountant, not a reason to form an entity in week one.

What's the actual difference between a sole proprietorship and an LLC when selling an app?

Liability separation. A sole proprietorship is just you — your personal assets are exposed if the business is sued or owes money. An LLC puts a legal wall between the two, which starts to matter when you store customer data, sign contracts with businesses, or have consistent revenue worth protecting. Taxes are basically the same either way until you elect S-corp treatment.

Do I Need an LLC to Sell Digital Products? (What I Did First)

The week I decided to charge for my first app, I made the mistake of googling “do I need an LLC to sell digital products.” Half the results were law-firm marketing pages explaining, in very calm fonts, that without an LLC I could lose my house. The other half were Reddit threads from Etsy sellers — closer to the truth, but not quite my situation.

Here’s the answer nobody puts in the first paragraph: no, you don’t need an LLC to sell digital products in the US. You can start charging this week as a sole proprietor, which is the default. That’s what I did, and the LLC became worth it much later, for boring reasons I’ll get to.

Let me save you the panic-scrolling.

The Short Answer: No — You Already Are a Business

In the US, the moment you start selling something on your own, you’re a sole proprietor. No filing, no registry, no ceremony. The business income goes on Schedule C of your personal tax return, and you pay self-employment tax (15.3% on profit) along with income tax. That’s the entire arrangement.

Every payment platform I’ve used is fine with this. Stripe, Paddle, Gumroad — all of them let you sign up as an individual. Nobody asks for articles of incorporation. When I set up billing for my first app, the “company formation” step was: nothing. I entered my legal name and tax details, and payouts started arriving.

So the real question was never “am I allowed to sell without an LLC.” You are. The real question is what an LLC would buy me, and whether that’s worth $50–$500 in filing fees plus ongoing state charges right now — or later, once the app earns enough to be worth protecting.

What an LLC Actually Protects You From

An LLC has one core job: separating your personal assets from your business liabilities. If a customer sues the LLC or the LLC owes money, your savings, your car, your apartment are generally out of reach.

For someone selling a $9/month web app, the honest risk assessment looks like this:

Low risk: a file converter, a Chrome extension, a content tool. Worst case, someone wants a refund and you issue it.
Real risk: anything that stores customer data, anything a business depends on to operate, anything where your code moving money or files can cause measurable damage.

Digital products sit low on that scale — which is why “form an LLC before you sell anything” is bad advice for a first product. You’d be paying recurring state fees to insure against a lawsuit that’s unlikely while your product is small and your customer count fits on one screen.

The other things an LLC gets you, ranked by how often they actually matter:

Credibility with businesses. Some B2B customers want to sign a contract with a company entity, get a W-9, pay an invoice instead of “some guy’s PayPal.” This was the first thing that pushed me toward forming one.
Clean separation of money. A business bank account in the LLC’s name. Note the flip side: if you form an LLC and still pay groceries from its card, you’ve commingled funds — which is exactly what lawyers point at to pierce the liability protection. The entity only works if you respect it.
Tax flexibility, eventually. By default, a single-member LLC is taxed identically to a sole proprietorship. The S-corp election can cut self-employment tax once profit is comfortably six figures, but that’s a conversation with a CPA, not a week-one move.

One thing an LLC does not do: reduce your taxes by existing. If a blog post tells you otherwise, it’s selling incorporation services.

Selling Through a Merchant of Record Changes the Math

Here’s the part the law-firm articles never mention, and for a solo dev it matters more than the LLC question itself.

If you bill through Stripe, you are the legal seller of record. Sales tax is your problem — registering, collecting, and filing in every jurisdiction where you have nexus. My merchant of record vs payment processor guide goes deep on this; the short version is that Stripe Tax calculates amounts for you, but the registration and filing liability still sits with you.

If you bill through a merchant of record like Paddle or Lemon Squeezy, they are the legal seller and you’re the supplier. Their infrastructure handles global sales tax and VAT compliance. And — this is the part that matters here — they sign up individuals. Sole proprietors. People with no company at all.

So the two questions everyone bundles together — “can I legally take money” and “who handles the tax paperwork” — actually come apart. You can take money as an individual and have the tax question handled, by billing through a merchant of record. For a first paid app that combo is hard to beat: no LLC, no tax registrations, no accountant on retainer yet.

Picking one is the hard part; wiring it up isn’t. Adding Lemon Squeezy checkout to a static Astro site takes two files and no backend — worth knowing before you spend a week deciding whether you’re allowed to sell. And if even a MoR signup feels like more paperwork than this month deserves, Ko-fi wired to PayPal is how I took the very first payment with no entity, no underwriting, and no tax registration at all.

This is also why I’d pick the billing model before worrying about the entity. The billing model changes your paperwork by a lot; the LLC changes it by a little.

When I’d Actually Form the LLC

I didn’t start with one. These are the triggers that make the filing fee worth it, roughly in the order you’ll hit them:

A business customer asks for a W-9 or a contract with an entity. This happens fast if your tool is useful to companies, and it’s a perfectly good reason to form one that week.
The product got riskier. You’re storing customer data, or businesses now run their workflow on you. The liability wall starts earning its keep.
Profit is consistent. Filing runs $50–$500 depending on the state, and the annual fees are the real cost — California charges an $800/year franchise tax, Delaware a flat $300. When monthly profit covers boring expenses like that without wincing, the decision makes itself.
You want the discipline. Separate account, cleaner books, an easier story the day you sell the project or bring on a partner.

Until one of those fires, an LLC is just a slower way to spend money on an unvalidated product. Validate first. Entities are cheap to form later and annoying to unwind.

Not in the US? The Short Version

Most countries have the same default: selling digital products as an individual is legal, with local registration thresholds you’d hit at some revenue level. The merchant-of-record point applies double for you — billing through Paddle or Lemon Squeezy means US sales tax isn’t your problem at all, and you don’t need a US company to sell to US customers.

What I’d specifically avoid: forming a US LLC from abroad “to look legit.” A foreign-owned single-member US LLC creates IRS filing obligations (including a form with a five-figure penalty for late filing) that most people don’t know exists until the letter arrives. If a MoR lets you bill as an individual, take that deal until real revenue says otherwise.

What I’d Do This Week

Get the app live if it isn’t. That’s step zero, and my first deploy guide covers it end to end — an app that isn’t live doesn’t need tax advice.
Pick your billing model before your business entity. Merchant of record if you want tax handled and to sign up as an individual; Stripe if you’re ready to own the compliance side. The MoR explainer is the decision that actually changes your paperwork.
Open a separate bank account even as a sole proprietor. Future-you, at tax time, will be grateful.
If you’re in the US, grab an EIN from the IRS site — free, takes about ten minutes, keeps your SSN off platform signup forms.
Revisit the LLC question when a trigger above fires. Not before. The LLC will still be there when the app is making money; the customers won’t be if you spend your first month on paperwork.

One more, since it isn’t a legal question but it decides whether any of this pays off: how to price a developer template or boilerplate. Getting the entity wrong costs you paperwork. Getting the price wrong costs you the product.