if I want to establish a small business, should I do a sole proprietorship or an LLC?
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if I want to establish a small business, should I do a sole proprietorship or an LLC?
I want to start a small business selling party decorations and henna art. I am not expecting to employ anyone and just getting started so will not have too much income. I just wanted to do the business legally with proper documentation and how to get started?
Asked on May 12, 2017 under Business Law, Florida
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
Register a sole member LLC in your state: an LLC, or "limited liability company," will protect your personal assets (e.g. home, personal bank accounts, vehicle[s]) from most business-based liability, such as if someone feels you didn't provide what they paid for and sues for breach of contract, or is someone injured by a decoration and sues for that reason. With a sole proprietorship, you can be personally sued over business debts, liability, or obligations.
When you set it up, select "partnership" or "disregarded" tax treatment, which means there will be no double taxation: profits and losses will pass through the LLC and drop directly to your personal "bottom line" and be taxed with any other income you get. An LLC will also facilitate tracking business expenses and using them as tax deductions (including the few hundred dollar cost of setting up the LLC). After setting up the LLC, go to the IRS website and get a tax ID or EIN number, which is basically a social security number for an LLC or corporation.
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