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Should You Choose a Sole Proprietorship or an LLC for Your Business?

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If you are starting a business, the question of whether to form a sole proprietorship or an LLC can be difficult. No one answer fits every situation, but there are some factors that need to be considered before making your decision. If you're looking to work for yourself but don't know where to start, learning how to set up your business by earning your Small Business Development Certificate from Tulane SoPA is a great first step.

Sole Proprietorship

A sole proprietorship is the simplest way to start a business, but it also has its downsides. On the upside, it is easy to start, inexpensive, and comes with less paperwork than an LLC. If you're starting a freelance business, this is a popular option. The downside to a sole proprietorship is that it does not offer any legal protection. You are personally responsible for your company's debts, lawsuits, and other liabilities, which can be financially devastating if you end up getting sued. Keep in mind that if you go into business with a partner, you cannot label your business as a sole proprietorship.

Limited Liability Company

LLCs are becoming an increasingly popular option among new businesses because they are relatively easy to form and offer owners protection. With an LLC, you are only responsible for paying taxes on the share of profit that you take, and your assets will not be held liable in a lawsuit. This is where LLCs really stand out from sole proprietorships. If someone sues your company, they can go after just its profits—they cannot sue you for your house, car, or other personal property in most cases.

The downside to an LLC is that it is more complicated and expensive to form than a sole proprietorship. It also takes time and money, in the beginning, for you to do all of your paperwork correctly so that everything meets legal requirements.

Which Is Better?

As was mentioned before, there's no one-size-fits-all answer to this question. The type of company that will best suit your needs depends on several factors, including the kind of business you're starting, the number of owners, the life expectancy of the company, and more. Each structure has its own benefits and drawbacks. The best thing to do is fully evaluate your business plan and make an educated decision on which structure would work best for you.

If you want to start your own small business but are unsure of where to start even after receiving your business degree, consider getting your Small Business Development certificate from Tulane School of Professional Advancement. Our top-notch programs can give you valuable knowledge that can help you make sound business decisions. Contact us today for more information on all the programs we offer.

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