There are many options when it comes to choosing a business structure. Each has its own advantage, of course, and many have certain limitations. Therefore, you need to engage in careful consideration before choosing a business structure. After all, you’ll likely be married to this structure for as long as your business is around.
One option available to you is sole proprietorship. Looking at it from a broad perspective, a sole proprietorship is not legally separate from its owner. Therefore, all income and debts are assessed on the business owner’s individual taxes. This type of business is easy to establish, which is one reason for its popularity amongst entrepreneurs. Other benefits include the lack of requirements, such as board meetings and votes of any kind, and the fact that business and personal funds can be comingled without issue.
However, since this type of business is not legally distinct from its owner, the owner remains liable for the business’s debts. Therefore, if the business tanks and winds up in bankruptcy, creditors can seek to recover debt from the owner’s personal assets. This can put one’s retirement and even his or her house on the line. Another disadvantage of this business type is that it rarely survives the business owner because it is so closely tied to him or her on a personal level. Therefore, those who are looking to create a more long-lasting business may want to consider other options.
Sole proprietorships, while right for some, can prove disastrous for others. This is why it is so important to carefully consider all business structure options before settling on one. A qualified business law attorney can help. The could assist with considering all of your options, helping you select the one that is right for you and develop all of the documentation you need to get your business up and running.