There are many important decisions to make when it comes to owning a small business, and many of them depend on what works best for you as the business owner. One important choice you will have to make is whether to operate as a sole proprietor, or as a limited liability company (LLC).
Every small business is unique, even within the same industry, so the right choice will depend on your needs. The best way to choose is to understand what each option has to offer and pick the one that makes you most comfortable.
Sole proprietorship is easy and affordable
Many businesses start out as sole proprietorships because it is the fastest and most affordable way to proceed. Basically, as the owner you are your business and everything falls to you. You can start working right away, and your profits or losses are filed on your own tax return. There’s no need to file any paperwork or any legal processes, you can just get going right away.
Of course, this also means that you are liable for everything related to your business. If something goes wrong and someone decides to file suit, they can go after you directly. You are risking your personal assets and name with sole proprietorship, which is a frightening prospect for many people. Small business owners whose businesses come with the potential for liability often go with an LLC option instead.
LLCs provide legal protection, but at a cost
With an LLC you can protect yourself from the liabilities of your business. If someone wants to sue your business, they can only sue the LLC. If they win and the LLC has to pay, your personal assets are not at risk. This layer of protection is very attractive, but it does require money and effort on your part.
Setting up a LLC is a legal process, which means you will probably be paying a lawyer or LLC filing company to help. There are also filing fees outside of any help you hire. Forming an LLC can change the way you file taxes, making it a little more complicated, and it can become even more complex when you bring in partners, or form your LLC in a different state. LLCs can be a very useful tool for small business owners, but only when they have all of the facts.
If you want to learn more about what’s best for your small business, browse our site for great information. We can also offer important services and support to help your business succeed.
Disclaimer: LVRG, LLC. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.