If you’re thinking of switching your job, it may be time for you to start your own business. If you start it on your own, there’s a chance you’ll be starting a sole proprietorship.
Starting a sole proprietorship is straightforward. In most cases, it’s also cheap, making it an option for budget-conscious business owners.
However, is a sole proprietorship really the best corporate model for you? We answer this question and more. Read on to learn more about what a sole proprietorship is and why it’s better to start an LLC instead.
What Is a Sole Proprietorship?
A sole proprietorship is a business entity where one person retains full control and ownership of a business.
For example, you become a sole proprietor when you set up your own website to provide coaching services with your own capital. As the owner, you will also oversee operations and make decisions for your store.
As the sole proprietor, you get free rein over decision-making and management. You’ll also get to keep most of your business’s profits.
It sounds good, doesn’t it? Not quite.
All the Control and Profit — But With All the Risks and Liabilities
All the control and revenue you get as a sole proprietor come at a price. In particular, there’s more risk involved. Here’s why.
Sole proprietorships are entities tied to their owners. For this reason, there’s no distinction between the business’s liabilities and the sole proprietor’s. In other words, debts and lawsuits can spill over to the business owner.
For instance, let’s say that your business has outstanding tax liabilities. To recover what you haven’t paid, authorities can seize your personal assets like your bank accounts.
Also, let’s imagine a scenario where someone sues your business. The lawsuit won’t just be directed at your business. By being the sole proprietor, you’ll be on the receiving end of the lawsuit too.
The Solution: Start an LLC Instead
How do you start a business where you retain maximum control and flexibility without the risks and liabilities? The answer is simple — register as an LLC.
An LLC (limited liability corporation) enables you to retain maximum control of your business. Here’s the best part: LLCs are separate entities from their owners or members. As a result, your business’s liabilities will not bleed over to your assets. Also, if your business runs into legal troubles, you get protection from lawsuits too.
Registering as an LLC requires the proper paperwork. Luckily, we offer legal templates for business owners looking to get their LLCs off the ground.
Be risk-free with an LLC. Kickstart your LLC today!