When it comes to business formation, you have a wide range of factors to take into consideration, and finding the best business entity is pivotal. From a partnership to an LLC, C corp or S corp, you have a number of options. Depending on your circumstances, you could come to the conclusion that a sole proprietorship is ideal.
You should go over the benefits and potential drawbacks of sole proprietorships.
Liability and other features of a sole proprietorship
The U.S. Small Business Administration provides an overview of sole proprietorships. A sole proprietorship does not result in the creation of a separate business entity, and you have total control of your business. As a result, there is no separation between the assets and liabilities of your firm and your personal liabilities and assets.
As a sole proprietor, you can secure a trade name, and this structure could suit your needs best if you have a low-risk business. However, getting a loan from a bank and raising funds could prove challenging, and you could become personally liable for your firm’s debts.
Moving forward with a sole proprietorship
It is essential to pinpoint the most suitable business structure before moving forward, especially since this decision has a significant impact on your liability, paperwork, how you can raise funds and the amount of taxes you owe. You should identify the best business structure from the start because converting to another business structure down the road could have negative consequences.
If you believe that setting up a sole proprietorship is the right call, make sure you evaluate the ins and outs of the process carefully.