Giving Options to
Sole Proprietorships.
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The Challenges of a Sole Proprietorship
SOME OF THE MOST COMMON HURDLES YOU MAY ENCOUNTER
No Liability Protection
Without a proper business entity, there is no personal protection against any liability or debt your business accrues.
Taxes
As a sole proprietor, you will pay a self-employment tax in addition to paying income tax for any business profits.
Investing Hardships
Growing your business poses issues since sole proprietorships can’t issue shares or have multiple owners.
Business Name
With just a sole proprietorship, you are technically doing business under your name, not any official business names.
Is A Sole Proprietorship My Best Option?
We Will Help You Decide On Your Business
Types of Business Entities
FIND THE ENTITY THAT IS RIGHT FOR YOU
| | Features | Protections & Taxes | Negatives |
|---|---|---|---|
LLC | Allows the most flexibility in terms of management and structure Can have unlimited members Can be owned by another LLC, corporation, or any other legal entity | Protects personal assets and liability from lawsuits Offers pass through taxation for business owners Requires separate tax filings | Will require regular fees and forms to maintain Can’t go public Not recognized internationally |
S-Corp | Allows for issue of shares Shareholders must be US residents Owners only get common stock | Protects personal assets and liability from lawsuits Offers pass through taxation for business owners Requires separate tax filings | Will require regular fees and forms to maintain Requires a firm structure, with a board of directors Must keep records and hold annual meetings |
C-Corp | Allows for issue of shares Owners can get preferred stock Best option to eventually go public | Protects personal assets and liability from lawsuits Taxed at the corporate level and at the personal level Requires separate tax filings | Will require regular fees and forms to maintain Requires a firm structure, with a board of directors Must keep records and hold annual meetings |
Sole Proprietorship | Doesn’t require any setup or fees Can only have one owner May still require licenses or forms, depending on state regulations | There is no personal liability protection Only taxed on a personal level Can complete taxes without a separate filing | No limited liability protection No company structure or organizing documents Limited business rights |
Features
Allows the most flexibility in terms of management and structure
Can have unlimited members
Can be owned by another LLC, corporation, or any other legal entity
Protections & Taxes
Protects personal assets and liability from lawsuits
Offers pass through taxation for business owners
Requires separate tax filings
Negatives
Will require regular fees and forms to maintain
Can’t go public
Not recognized internationally
Features
Allows for issue of shares
Shareholders must be US residents
Owners only get common stock
Protections & Taxes
Protects personal assets and liability from lawsuits
Offers pass through taxation for business owners
Requires separate tax filings
Negatives
Will require regular fees and forms to maintain
Requires a firm structure, with a board of directors
Must keep records and hold annual meetings
Features
Allows for issue of shares
Owners can get preferred stock
Best option to eventually go public
Protections & Taxes
Protects personal assets and liability from lawsuits
Taxed at the corporate level and at the personal level
Requires separate tax filings
Negatives
Will require regular fees and forms to maintain
Requires a firm structure, with a board of directors
Must keep records and hold annual meetings
Features
Doesn’t require any setup or fees
Can only have one owner
May still require licenses or forms, depending on state regulations
Protections & Taxes
There is no personal liability protection
Only taxed on a personal level
Can complete taxes without a separate filing
Negatives
No limited liability protection
No company structure or organizing documents
Limited business rights
Frequently Asked Questions
If you’re trying to decide if a sole proprietorship is the smartest choice for your business, look through these frequently asked questions. To find out the best options for your business, ask one of our attorneys today.
From the moment you start doing business, without an official business entity, you are a sole proprietor. As implied by the name, a sole proprietor is the only owner of the business, so there can be no shareholders or co-owners. To do business lawfully, some states requires licenses, fees, or permits from sole proprietors. To know what’s required of you as a sole proprietor, it’s best to speak with an attorney so you can be sure your business is on the right path.
When your business is operating as a sole proprietorship, it is operating under your personal name. Whatever name you want for your business would have to be registered as a DBA, or doing business as. A DBA is the business equivalent of a nickname, in that it informs the state of another name your business is operating under. Another way to secure a name for your business is to create an official business entity, such as an LLC or corporation.
Yes, you can absolutely form an LLC or corporation our of your business. Because a sole proprietorship is so limited, many business owners create LLCs or corporations so they can add co-owners, distribute shares, or go public. Contact our office to get the process started for you right away.
You may have some trouble opening a business bank account without an EIN. Most sole proprietorships don’t have an EIN because they aren’t hiring employees. If you want to remain a sole proprietorship, you can often open a separate bank account, dedicated to your business, with your social security number.
