LLC vs Doing Business in Your Name Only? What's the Difference?
LLC vs. Doing Business as Yourself: Which is Right for You?
Choosing the right business structure can feel overwhelming. You might be wondering:
"What if I pick the wrong one?"
"Will my entire business explode?"
"Is it too late to make the right choice?"
The good news? Your business won't explode! And it's definitely not too late to make the right decision.
However, choosing the wrong structure can have significant consequences.
For most solopreneurs, the primary choice boils down to:
Sole Proprietorship: You operate as yourself, with no separate legal entity.
Single-Member LLC: You operate through a limited liability company, providing a layer of protection.
Here are three key questions to consider:
1. Do you want to protect your personal assets?
Sole Proprietorship: You are personally liable for any business debts or legal issues.
LLC: Offers limited liability protection, shielding your personal assets (like your home and savings) from business debts and lawsuits.
2. Are you prepared for the administrative requirements?
Sole Proprietorship: Generally requires less paperwork and no registration fees with the state.
LLC: Requires registration with your state, which involves fees and ongoing annual filings. You'll also need to create an Operating Agreement.
3. Do you need flexibility in how your business is taxed?
Sole Proprietorship: Business income is reported on your personal tax return.
LLC: Offers tax flexibility. You can choose to be taxed as a sole proprietorship or as a corporation, potentially saving you money on taxes.
For many solo entrepreneurs, the liability protection offered by an LLC outweighs the administrative burden.
Download my free guide, "Setting Up Your LLC: A Step-by-Step Guide," for more information and to help you make the best decision for your business.
