Wednesday, March 13, 2013

LLC Vs Sole Proprietorship - A Few Things To Consider

When you are tired of working for someone else and you want to start your own business you will often times be faced with several questions. If you do things the smart way you're going to have to decide whether or not you go for an LLC or a sole proprietorship moving forward. There are many differences between the two, and figuring out which one will help you out the most can be a daunting task, which is why it's important to look at some pros and cons on each side.

First and foremost, if you're going to conduct business on your own, without a lot of outsiders coming in and helping you, you're going to want to start a sole proprietorship. In this type you will be doing everyone from marketing to financial matters on your own. You could get an employee to help you down the road, but often times people focus on this type if they are dealing with businesses that are highly personal and have low risk of getting into legal issues that many will have to face.

The downside to going at it solo is that you could be liable for many issues and if you get sued or someone gets injured your place of work, you will be liable and your assets can be seized. You could lose all your profit, plus your personal home, bank account, and anything else you have in your possession. This poses a danger to most people, which is why they opt for another way to go about doing business.

The second way to get your business going is to form an LLC. This type of company will allow you to structure your business as a separate entity from who you are and what you personally do. Even if you're the only owner, you will have a set of books and documents that will outline your role within the company, and you will have to manage things in a method that is outside of just being "personal" about it.

The upside to this option is that you will not get sued or be responsible on a personal level if something within your business goes wrong. If you get sued and you lose, your assets will remain under your custody, however, your business will have to foot the bill. Only the profits and accounts that are possessed as the business will be liable for anything. This is why many people go with this option, as it helps keep personal and business options away from each other.

Forming an LLC also pays a different type of tax than having a sole proprietorship. It can also be set up in another state where the cost of doing business can be quite less than other areas. An LLC can act with several owners, one owner, or a variety of different manager styles, which makes it a versatile option moving forward.

Whether you go at it alone or try to form an LLC, you'll see that the two options abound for those that want to start a business.

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