1) A sole proprietorship provides *no* protection against liability, while an LLC provides strong, but not complete or absolute, protection (there are some causes of action or claims which the LLC will not protect you against, such as a tort, or injury claim, if you personally did something to injure another, even if you did that while working for your LLC--you can be sued as the injury-causing person). Therefore, you should have an LLC. As an additional benefit, if you keep the LLC accounting, bank accounts, checks, etc. fully separate from your personal, it is somewhat easier to take business deductions since you can prove them more easily.2) You should have general liability insurance for at least $250,000 and property coverage for  your tools of the trade and supplies. You also need to make sure that if you use your car for work, that your insurer knows that--they'll probably charge you a little more, but you'll be covered for a car accident while at work.3) Note that your pension and social security are already highly protected from any claims; the above protection is for any assets of yours (like cars, tools, real estate, boats or ATVs, etc.) and any other sources  of income.