Deciding how to operate your business as an entity is an important decision. Plenty of people operate as a sole proprietorship. Though operating as a corporation or LLC can provide significant benefits. So which one should you operate as? Let’s break this down by starting with how to form a sole proprietorship vs an LLC.

Forming The Entity

Well, the first difference between a sole proprietorship vs an LLC is you don’t technically “form” a sole proprietorship. A sole proprietorship is just one person doing business. So, start doing business, and boom! You’re a sole proprietorship.“But what if it’s not just me and I have a partner?” The equivalent of a sole proprietorship is a general partnership if there’s more than one person. So the same applies to a general partnership as a sole proprietorship, except there are two or more people.

There aren’t many (if any) states that have real legal requirements for operating as a sole proprietorship. Though most states do require that if you’re going to do business under a different name than your legal name, then you’ll need to file a DBA or trade name with the Secretary of State. But aside from that, there’s not much that goes into operating as a sole proprietorship. That doesn’t mean there are no rules or regulations for a sole proprietorship though. You still have to follow the law as you would with any other business. For example, if you’re going to make taxable sales, you still need a sales tax permit or license.

Why An LLC is Different

An LLC on the other hand is a legally recognized business entity and we do “form” an LLC. This is done by filing Articles of Organization with the Secretary of State. The term may differ from state to state but overall you are still forming the LLC.

Tune in to this week’s episode of All Up In Yo’ Business to find out which one is better for your business. And be sure to subscribe to our YouTube channel for more All Up In Yo’ Business! 

Want more information on business? Check out: LLC Operating Agreement Explained.