If you’re considering launching a business with one or more other people, a partnership might be a legal business structure that you’re considering. Find out what partnerships are in business, and the pros and cons of setting up your small business as a partnership. (more…)

LLCs are a popular legal business form for small businesses. Discover what LLCs are, and what their advantages and disadvantages as a business model are.
What is an LLC?

LLC stands for “limited liability company.” LLCs have become the legal business structure of choice for many small business owners, because they combine some of the advantages of various other legal business forms.
Pros of LLCs

• Owners of an LLC get the benefit of limited personal liability, just as owners of a corporation do.
• LLC owners can take advantage of pass-through taxation, like sole proprietors and owners in a partnership, instead of double taxation as a corporation.
• LLCs can be less expensive to start, and involves less paperwork, than corporations.
• LLCs can have a single owner or multiple owners, depending on its location.

Cons of Sole Proprietorships

• Some states don’t allow single owners of an LLC.
• LLC income can be subject to self-employment tax.
• LLCs can be more expensive to launch as opposed to sole proprietorships or partnerships.

If you plan to operate your business on your own, a sole proprietorship may be an acceptable and appropriate legal business form for your needs. Find out what sole proprietorships are, and whether or not that legal business form would suit your small business.

What is a Sole Proprietorship?

A sole proprietorship is a business with only one owner, that’s not a corporation of any kind. Many business owners automatically start a business as a sole proprietor when they launch their small business.

Pros of Sole Proprietorships

• Sole proprietorships are easy to set up.
• Sole proprietorships are inexpensive to set up.
• Sole proprietors don’t have to keep as many records for the IRS as corporations do.
• Sole proprietors control their business finances and profits exclusively.
• Taxes are simpler for sole proprietors, as income is declared on their personal income tax forms.

Cons of Sole Proprietorships

• The business owner will be held personally liable for debts of the business.
• It can be harder to raise startup capital and financing for a sole proprietorship as opposed to corporations and other legal business structures.
• It can be easier for the IRS to declare a sole proprietorship is a hobby rather than a business for tax purposes as opposed to other business structures.
• All business losses are on the shoulders of the business owner alone.