As an inspiring small business owner it can be a difficult decision trying to determine if you should choose an LLC or a Sole Proprietorship. While both carry their own benefits each can out do the other in some areas. Being well informed on the benefits and differences between an LLC and a Sole Proprietorship can help you to determine the best legal entity for your small business.
What is an LLC and a Sole Proprietorship?
Before making your decision it is important to know what exactly an LLC and Sole Proprietorship are.
An LLC, Limited Liability Company, is a business entity with similar aspects to a corporation such as limited liability protection as well as similar to a partnership offering operational flexibility.
A sole proprietorship is the individual business owner, there is no legal distinction between the business and the individual. There is no personal asset protection, meaning if the businesses debts are higher the the business has the individuals personal assets will be used to cover the debts.
Choosing your businesses name
- LLC, name availability check is done through the secretary or department of state
- Sole Proprietor name availability check is done through the registry with the city or county clerk’s office
What is the cost to your business
- LLC prices vary by the state filed in, some states go as high as $500
- Sole Proprietorship filing prices vary by the city or county clerk office, on average cost is $10
Who’s debt is it?
- An LLC offers a business owner with personal asset protection, only the businesses assets can be taken into account with clearing up businesses debts
- Sole Proprietorship offers no asset protection, if the businesses debts outweigh the businesses assets the business owners personal assets will be taken into account to clear up the businesses debts
Is there an expiration?
- With an LLC there is no expiration or refiling required, the business holds its name until it dissolves itself
- With an Sole Proprietorship the business needs to be refiled with the city or county clerk accordingly