No, but you might want to. Forming an LLC, a corporation, or a nonprofit protects your personal assets and may unlock tax benefits.

Personal liability protection. An LLC protects owners from being personally on the hook for business liabilities or debts. A sole proprietorship doesn't.

Both protect owners so they're not personally on the hook for business liabilities or debts. Key differences include how they're owned (LLCs have one or more individual members and corporations have shareholders) and maintained (corporations generally have more formal record-keeping and reporting requirements). Even though LLCs are considered easier to start and maintain, investors tend to prefer corporations.

If you plan on using a business name that's different from your personal or official company name, you're required to get a DBA in most states or counties.

Depending on the nature of your business, and where it's located, you might need a license or permit to operate legally within your city, county and/or state.

Yes. This can be helpful for business owners who want the management flexibility of an LLC—but also want to minimize employment taxes on the profits they receive.