What is the difference between an LLC and a sole proprietorship?

When starting a business, one of the most important decisions you’ll make is what type of business structure to choose. There are many different options available, but two of the most popular are the limited liability company (LLC) and the sole proprietorship.

So, what’s the difference between an LLC and a sole proprietorship? And which one is right for your business?

Sole Proprietorship

A sole proprietorship is a business owned and operated by one person. It’s the simplest and most common business structure in the United States. To form a sole proprietorship, you don’t need to file any paperwork with the government. You can simply start doing business under your own name.

As a sole proprietor, you have complete control over your business. You make all the decisions, and you’re responsible for all the profits and losses. You also have unlimited liability, which means that you’re personally liable for any debts or lawsuits that the business incurs.

Limited Liability Company (LLC)

An LLC is a hybrid business structure that combines the limited liability of a corporation with the tax benefits of a sole proprietorship. To form an LLC, you’ll need to file paperwork with your state government. The requirements vary from state to state, but you’ll typically need to file articles of organization and pay a filing fee.

As an LLC owner, you have limited liability, which means that your personal assets are protected from business debts and lawsuits. You also have some flexibility in how you’re taxed. You can choose to have your LLC taxed as a corporation, a partnership, or a disregarded entity.

Which One is Right for You?

So, which business structure is right for you? It depends on your individual circumstances and needs.

If you’re a solo entrepreneur who wants to keep things simple and don’t need the liability protection of an LLC, then a sole proprietorship may be a good option for you.

If you’re starting a business with partners, or if you want the liability protection of an LLC, then an LLC may be a better choice.

Ultimately, the best way to decide which business structure is right for you is to schedule a call with an attorney at WINTER LLP. We can help you weigh the pros and cons of each option and choose the one that’s best for your business.

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