A sole proprietorship is the easiest way to start your business, however, it is the riskiest type of business formation since the proprietor has unlimited liability. A sole proprietorship is not corporated and does not have the same protection as corporations, however, it is easier for tax purposes.
The business owner of a sole proprietorship becomes responsible for the business's expenses, debts, and even lawsuits if such should arise. Did I mention the business owner of a sole proprietorship is PERSONALLY responsible? This means that your personal bank accounts, assets, investments, and wages are at risk.
Unlike a corporation, there is no legal separation between personal assets and business assets. If the business owner neglects to pay off a business loan or other obligations, creditors may have the right to help themselves to assets, personal or business, for payment.
If you are starting a business or thinking of starting one, consider forming a limited liability company to protect you and your personal assets. If you already have a sole proprietorship, it's not too late!
Stay tuned for a comprehensive list of different types of limited liability companies and corporations.
Types of Limited Liability Companies:
Limited Liability Partnership
Limited Liability Limited Partnership
Family Limited Partnership
Types of Corporations:
Limited Liability Company