If you file as a sole proprietor, you will be liable for all business debts and liabilities. For example, you have a cleaning business and your employee steals from your clients, you will be liable personally. If you
form an LLC, and the same thing happens, your personal assets, such as your home and car are protected. If sued, they can only get what the LLC has. If only $1,000 in the bank, that is all the plaintiff gets.