Why a Sole Proprietorship May Be in Your Best Interest
Talk to various people about what they think is the best business structure, and more than likely, they’ll tell you to form an LLC and go incorporated. That’s because this type of structure offers protection for those with personal assets. If you get sued or anything happens to your business, your personal assets are protected. This means you won’t lose your car, house or anything else of value. Only your business is affected.
The truth is that an LLC or corporation is not the best route for every business. In fact, for smaller businesses, a sole proprietorship may be your best bet. It’s definitely the easiest and cheapest way to run a business, which is what every new entrepreneur wants. However, not many people recommend this route. Even your accountant or lawyer may tell you to opt for an LLC.
There are some situations in which a corporation or LLC would not make sense. For example, if you are young and have no personal assets, then you have nothing to lose anyway. If you work in the medical or legal fields and you’re sued for malpractice, you’ll still be personally liable, no matter your business structure.
If you opt for a sole proprietorship, you’ll need to know how to protect yourself. Here are some tips that can help poise your small business for success.
Get an EIN
If a client needs to give you a 1099, you’ll have to provide them with either your Social Security number or employer identification number (EIN). An EIN offers a layer of protection, since it makes it harder for someone to steal your identity.
Observe Best Practices
Even sole proprietors should follow legal procedures to protect themselves. When starting a new project, draw up a contract and make sure it is signed by all parties involved. If you fail to do so, you won’t have any recourse should something go wrong. By having the contract signed, everyone is legally bound and they must uphold their end of the deal or they could face punishment as outlined in the contract.
Keep an Open Mind
While a sole proprietorship is the easiest way to run a business, it’s not a good long-term plan. A company’s success makes this a temporary plan. As your business grows, you may acquire personal assets along the way. You’ll want to protect them and the best way to do this is to go incorporated in the future. Therefore, you should think about the future and keep an open mind.
Learn More About Sole Proprietorships
Sole proprietorships have their pros and cons. If you’re just starting out and you’re the only person who owns your business, then a sole proprietorship would be the simplest structure. However, there could be liability issues.
Is a sole proprietorship the best option for you? Contact Orlando sole proprietorship lawyer B.F. Godfrey from Godfrey Legal for advice. He can help you make the right decision so your business can succeed. Schedule a consultation today. Fill out the online form or call (407) 890-0023.