Starting a business is an exciting but hectic time, and when it comes to forming a legal entity most are unsure where to start. Many are unsure if they should form an LLC or a Sole Proprietorship. Many ask themselves, does it matter? And, what’s the difference? This infographic will walk you through the key difference, benefits, and how to decide which is best for your new business.
What’s the Difference Between Sole Proprietorship and LLC?
- Limited Liability Company (LLC): An LLC is a business structure that removes any liability that the business encounters from the owner or owners of the company.
- Sole Proprietorship: A sole proprietorship refers to an unincorporated business, outside of a registered trade name. Keep in mind, you don’t have any protection if you encounter legal liabilities.
Benefits of an LLC
- Separates Your Business and Personal Finances
- Saves Time and Money on Your Taxes
- Ability to Bring on Investors or Business Partners
Benefits of Sole Proprietorship
- Straightforward Setup
- Fewer Taxes and Fees
- Can Use Your Personal Banking Account
How to Choose the Right One?
- Can your business withstand shaky economic times?
- Unexpected economic downturns can impact business greatly no matter what entity you form, but an LLC offers some protection during these times.
- Will you engage in complex activities?
- If you plan to invest in equipment or tools, raw material, or property to do business forming an LLC will be your best option to reduce your risk.
- Do you plan to expand?
- If you have plans to expand to other states or countries you’ll want to form an LLC or other business type to ensure that you are protected as you navigate differing tax requirements and regulations.
Bottom line, forming an LLC offers the most protection when starting your business. A sole proprietorship can be too risky during poor economic times or if you expand into other markets. Use our infographic to help you figure out what business entity is best for you and your new business.