Sole Proprietor vs LLC vs Corporation
The first question that usually comes up when starting a business is undoubtedly going to be which entity to use for your business. As a business owner myself, I know it can be difficult to structure a business to make it as easy as possible while at the same time making it as profitable as possible.
The three most common types of structures for a small business are the sole proprietor, LLC, and corporation. These are by no means the only options for business structure; there are many more options out there (e.g., general partnerships, limited partnerships, limited liability partnerships, cooperatives, non-profit corporations, etc.). But they are not nearly as common or popular as the sole proprietor, LLC and corporation. So I’m not going to talk about them here! 🙂
Sole Proprietor vs LLC vs Corporation: The Sole Proprietor
If you are operating as a sole proprietor, this means that you have not really formed any legal structure of a business entity. If you are just an individual making income from providing services or selling products and you have not registered anything with your state, then you are already operating as a sole proprietor. If you are operating under a trade name (e.g., if I am operating a lawn mowing service under the name “Aiden’s Lawn Mowing Service,” that would be the trade name), then you should file a Statement of Trade Name with the Secretary of State in order to register the fact that you are operating under that trade name. However, just because you file your trade name does not mean that you are an LLC or any kind of entity; you are still just a sole proprietor.
As far as taxes go, as a sole proprietor, all of the income to the business is taxed as personal income to the business owner.
Tune in to the new All Up In Yo Business’ to find out more. Contact us today if you need help with your business. And be sure to subscribe to our YouTube channel for more All Up In Yo’ Business!
Want more information about LLC’s? Check out: Should I Include LLC in My Trademark?
Thanks for this great site! Clear and succinct, straight-talking info.
I was in the same boat couple of years back. I went my first few years in business as a sole proprietor. Then switched to an LLC once I was sure I was going to stick with it.