if I want to establish a small business, should I do a sole proprietorship or an LLC?

UPDATED: Sep 30, 2022

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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


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 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.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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