Choosing a Business Structure, Part 2: Pros and Cons of Sole Proprietorships
This article is continued from Part 1: Pros and Cons of LLCs.
One method of forming a business is to become a sole proprietorship. This is certainly the easiest way to create a business, in that it doesn’t require you to specifically do anything.
There are no specific forms to file with your state government and you will not be required to pay any fees or expenses in order to create your business. When your assets and startup funds are limited, this is certainly an excellent option to consider.
When you start a sole proprietorship, you will find that all you need to do is fill out a separate form with your personal taxes each year. This form will outline your business expenses and revenue.
The downside of choosing this method, however, is that your personal and business assets are one and the same. Essentially, this means that if you were to get sued, your personal and family assets can be seized or used to pay costs and debts.
This is certainly risky for people with a number of family assets, such as homes, savings, vehicles, and the like. Determining if this is the right method for you will take a bit of careful consideration.
It is important to realize that the option you choose does not have to be permanent. Many people prefer to start their businesses as a sole proprietorship, forming an LLC only when there is significant income and a larger client base.
If you are uncertain whether this might be the right choice for you, choosing to speak to a legal professional might be worth the time and expense required. You want to ensure that the method of business formation that you choose will offer the most benefit and protection for your needs and a lawyer can certainly offer excellent advice.
Continue to Part 3: Pros and Cons of S Corporations…