When it comes to starting your own business, it’s hard to decide whether you should opt for a Sole proprietorship or LLC. Both are valid options, but only one is good for fulfilling all of your expectations and needs. Before you decide on anything, you need to be informed about both types of business in depth. After all, this is a consequential decision you’re making. There’s no need to rush into things. Read, research, and think long and hard before you make your final decision. So, for your first step, here is what you need to know.
1. What is an LLC?
An LLC stands for “Limited Liability Company” and is considered to be a legal entity. That means that it can be used to run a business or hold assets. This variety allows you to further decide what you want to do with your new business. Will you run something entirely new or hold real estate property assets and make your profit there? This all depends on your goals, of course.
An LLC can be run by one or multiple people. Not only that, but it can have multiple owners. That means that you can build a network of trusted people and start your entrepreneurial journey together. This type of administration separates your personal and work life, and does so quite efficiently.
2. Advantages and disadvantages of an LLC
The biggest advantage of an LLC is that it aims to protect your assets. That means that there is little to no risk of losing anything you worked for if the business doesn’t end up taking off. What’s more, due to the increase in popularity, it has become easier to start an LLC and maintain it as far as the law aspect is concerned. One advantage that has guaranteed this popularity is that you get to avoid double taxation if you start an LLC. Finally, it’s much easier to run a business if multiple people own it.
That being said, you need to choose your network of people carefully. The person or people you choose should be trustworthy and hardworking, as this is the only way to ensure your business will prosper. You need to have people you can count on a regular basis and in times of crisis.
3. What is a Sole proprietorship?
Simply said, in this scenario, you are the business in the eyes of the law. That means that your company isn’t counted as an entity on its own, but that you are that company. It’s become a popular option among people, but it slowly decreasing in popularity as they are discovering more favorable options. Still, it can be just the thing you’re looking for if you don’t want to get involved in some other type of business. It is by far the simplest option, combining your personal and work life.
Since it does have some drawbacks and can be hard to handle for some people, you should talk to a lawyer for small business operations. They’re the expert in this area and will be able to properly advise you if a sole proprietorship is a right move for you.
4. Advantages and disadvantages of a Sole proprietorship
Though the advantages of a sole proprietorship aren’t very numerable, they exist. Mostly, you’ll be able to set things up more easily and without as much hassle. The main issue with this type of business is that you’ll have absolutely no protection. Since you are the business, you are held accountable for everything bad that might happen. That means that you’ll have to personally pay off any debts, for example. Your car and house are also at risk.
We can’t predict what might happen to our business and how well it will flourish, which is why it’s very risky to get into a sole proprietorship. You can think you’ve got everything in order and that you’re sky high as far as success is concerned, but be at the bottom the next day.
All in all, there are many things to consider when you want to get into a new business. Both an LLC and a Sole proprietorship can be useful and profitable if you know what you’re doing and if you do it well enough. Remember that confidence, along with knowledge, is the key ingredient to your success. Finally, let’s not forget persistence. Mix all three and you’ve got yourself a profit, regardless of what type of business you opt for.