Don’t Form an LLC (4 Reasons You Should NOT form an LLC)

That old-school lawyer in the pinstripe suit will tell you the same thing every time: “Before you do anything else, you need to form an LLC.”

But here’s what they won’t tell you: You probably don’t need one yet.

I’ve worked with thousands of founders at doola, and I’ve seen this pattern play out over and over again. Entrepreneurs spending weeks obsessing over business formation paperwork when they should be out there talking to customers and making their first sale.

So let me break down the four practical reasons you probably don’t need an LLC right now and the one psychological reason you might want one anyway.

Reason #1: You Have Zero Dollars in Revenue

This is the most practical reason, and it’s the trap I see the most founders fall into.

An LLC, a Limited Liability Company, is a legal shield. Its entire job is to protect your personal assets (like your house, your car, or your personal savings) from your business debts.

But here’s the thing: to have business debts, you need a business. You need customers, you need invoices, you need a product.

When you’re in the idea phase, you don’t have any of that. You just have an idea. And “idea insurance” isn’t a real thing.

If you have no revenue, you have no customers. If you have no customers, you have no business debts and no one to sue you.

You’re buying an expensive, complicated shield for a game you’re not even playing yet.

You’re paying state filing fees, you’re signing up for annual reports, you’re committing to hiring a registered agent—all for a “shield” that is protecting nothing.

Your first and only goal right now is to get in the game.

Reason #2: You’re Not in a High-Risk Business

Even if you’re making a little money, say, your first few hundred or even a thousand dollars, you still might not need an LLC if you’re not in a high-risk business.

When lawyers talk about “risk,” they mean “liability.” Think about businesses that have real physical-world risk:

• A trucking company, where a driver could crash
• A restaurant, where someone could get food poisoning
• A construction company, where something could fall

Those are high-risk businesses.

If you’re a freelancer, a coach, a blogger, or you’re selling digital products, what’s your biggest risk? It’s not that your blog post is going to physically harm someone. The biggest risk is that you don’t deliver the work you promised, or the client just doesn’t like it.

An LLC does not protect you from that. It doesn’t protect you from doing bad work. That’s just a breach of contract issue, or a customer service problem.

A clear client contract, good communication, and excellent work is far more important at this stage, and offers more real-world protection, than a state filing.

Reason #3: You’re “Judgment-Proof”

This is a hard truth, but it’s an important one. Remember, the entire point of an LLC is to protect your personal assets.

So here’s the hard question: Do you have significant personal assets to protect?

If you’re a student in a dorm room, if you’re just starting your career and have $500 in the bank, if you don’t own a house or have a massive investment account, then you are what the legal world calls “judgment-proof.”

Judgment-proof literally means that even if someone did sue you and won, there’s nothing for them to take.

A lawsuit costs a lot of money to file. No lawyer is going to take on an expensive case to win a judgment against someone who has no assets.

You’re buying an expensive solution for a problem you simply don’t have yet. Save your money. Focus on making money. Build up some assets worth protecting.

Reason #4: Admin Shouldn’t Come Before Customers

This fourth reason is the one that old-school firms never talk about, because it’s not about the law. It’s about focus.

The single biggest mistake I see founders make is prioritizing admin over customers.

You’re spending weeks stressing about what state to file in, what a “registered agent” is, how to get an “EIN,” what an “operating agreement” needs to say, when you should be spending that exact same time talking to 20 potential customers, building your landing page, making your first sale, or getting feedback on your product.

That old-school lawyer was right about one thing: You don’t need an LLC. You need a business.

A business is not a piece of paper from the state. A business is a system that gets customers and solves their problems. Your only job right now is to build that system. The legal paperwork is just a container for it after it’s built.

So When IS the Right Time to Form an LLC?

The practical trigger is when you’re consistently making revenue. That $1,000 a month mark is a great milestone. Or, when you’re about to take on a partner, an employee, or an investor. That’s when it becomes real.

And when that day comes, you don’t want to call a slow, expensive lawyer who still uses a fax machine and charges you $2,000 just to file a simple form.

You’re a modern founder. You need a modern partner.

At doola, we’re the “Business-in-a-Box™.” We’re a tech platform that founders love. You can get formed, get your US bank account, and manage all your state compliance and tax filings, all from one simple, clean interface.

We built this company, backed by Y Combinator and $13M in funding, specifically for founders like you.

The One Psychological Reason You SHOULD Form an LLC

Here’s the exception to every rule I just gave you.

What if you have zero revenue, you’re low-risk, and you’re judgment-proof, but you’re still thinking about forming an LLC?

Sometimes, you’re not stuck on admin. You’re just scared to commit. You’re treating your dream like a “side project” or a “hobby,” and you know it.

You tell your friends “Oh, I’m just dabbling,” because you’re afraid of what happens if you go all-in and fail. And that “hobby” mindset is holding you back.

If spending the money, signing the paper, and getting that official email from the Secretary of State is the one thing that will make you mentally flip the switch—the one thing that will force you to finally take this seriously, the one thing that will make you wake up and say “I am not a wannabe, I am a founder“, then do it. Do it today.

Because that psychological commitment, that shift in your own identity, is more valuable than any filing fee.

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Bottom Line: Focus on Building First, Paperwork Second

For most early-stage founders, the LLC comes later. Your energy is better spent validating your idea, finding your first customers, and building something people actually want to pay for.

But when you’re ready to make it official—when you’ve hit that consistent revenue milestone or you’re bringing on a partner: doola is here to make business formation simple, fast, and affordable.

Stop overthinking the paperwork. Start building your business.