If I am looking to start selling baby shoes online and will have my own store, should I set up an LLC or is a sole proprietorship enough?

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If I am looking to start selling baby shoes online and will have my own store, should I set up an LLC or is a sole proprietorship enough?

I am estimating I won’t be making a lot of money in the beginning.

Asked on September 6, 2012 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Definitely set up an LLC. An LLC is its own legal entity; it's main effect is to insulate its owners or managing members from most business-related liability, such as for breach of contract or for loans to the company (unless personally guaranteed). Without an LLC (or corporation (though for most small businesses, an LLC is more flexibile, simpler, and better), if you incur business liability, your personal assets (e.g. home, bank account) are at risk. (Note that an LLC is not perfect protection: certain kinds of tax debts can still reach you personally, as can liability if you personally did something wrong, like running over someone while on a business trip.)

Other advantages of an LLC: it makes it easier to track--and deduct--business expenses, if you use a business account or credit card; it looks more "professional" to potentially business partners, distributors, vendors, or customers.


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