You’ve wanted to open a business for some time, but you’ve never been sure what kind of business you were going to open. Now that you’ve settled on the business you want to run, you need to think about the type of business structure you should choose.
Many people start out with a sole proprietorship, but this option doesn’t leave you with much in the way of legal protection. One that may provide you better options is the limited liability company designation. As an LLC, your business becomes a separate entity. That means that you’re protected against personal liability.
You’ll still be taxed, in most cases, on your entire net income. So, you may not save much on taxes as an LLC. However, you do have additional protection for your personal assets and won’t have to worry about putting them at risk if your company is sued.
For example, if a person falls in your shop and sues your company while you’re a sole proprietor, they could seek compensation through your personal income, insurance and assets. With an LLC, you are shielded and creditors would only be able to come after your business.
Similarly, if your business goes bankruptcy when you’re a sole proprietor, your personal assets may be at risk as well. With an LLC, only your business goes into bankruptcy, and only its assets are at risk.
These are a few things to think about. If you haven’t chosen a business structure, you may want to look into all the different options and go over them with your attorney.