| Bootstrapping a startup means looking for every | | | | corporate status, there is no doubt that the hiring does |
| opportunity to cut expenses. Thus, it is common for | | | | not meet the standards of being an employee, |
| first-time business owners to skip over registering their | | | | because the presumption of independence is evident in |
| business, assuming that running it as a sole proprietor | | | | the entity status, thus the company is more likely to |
| will be sufficient. While it's true that sole proprietor | | | | hire your company over a sole proprietor. |
| status is the least complicated to manage -- less | | | | LLCs Open the Doors to Growth |
| paperwork, fewer filing requirements, the most flexibility | | | | Operatinga business as a sole proprietorship not only |
| -- the reality is that the benefits of organizing as an | | | | limits your options, but also can limit your thinking. As a |
| LLC far outweigh the complications. | | | | solo owner, there is no easy way to bring in investors |
| LLCs Provide Protection | | | | for growth and expansion. With an LLC or |
| The structure of an LLC or corporation exists for one | | | | corporations, your options are wide open for including |
| primary purpose -- to separate business and personal | | | | partners as you see fit. You can build the business's |
| liability. With sole proprietorships, all of your personal | | | | credit separately from your own, enter into contracts, |
| assets, including your house, cars, and savings, are | | | | and own property in the name of the business, |
| potential targets for any lawsuit or judgment against | | | | presenting a more professional image. And, your own |
| the business. Don't assume that none of your | | | | ideas of how far the business can go can be |
| dedicated customers would ever sue -- if you make | | | | influenced by the formality of organizing as a limited |
| an error that costs them dearly, their attorney will turn | | | | liability entity. Something about formalizing your |
| to you for reparations. | | | | operations inspires a lot of folks to think bigger than |
| In addition, businesses can struggle for all sorts of other | | | | just working for yourself. |
| reasons, such as a lagging economy, that are out of | | | | Sure, there are valid arguments for selecting sole |
| control of the owner. With the protections of limited | | | | proprietorship status. Whether you organize as an LLC |
| liability, the business can take the fall without | | | | or corporation, there are some fees and paperwork |
| significantly impacting the owners. Sole proprietorships | | | | required, usually once or twice per year. And, new |
| and partnerships can leave the owners holding the | | | | business owners are often required to provide |
| bag, and paying off the business's debts (or worse, | | | | personal guarantees for bank or vendor debts even |
| filing personal bankruptcy)...outcomes that will affect | | | | with formal organization, meaning the protection |
| you for years. | | | | features are not always comprehensive. |
| LLCs Provide Opportunities for Your Business | | | | But if you are starting a business with any plans for |
| Particularly in the case of independent contractors, | | | | growth, organizing as a limited liability at the start will |
| securing an LLC can open doors not available to sole | | | | protect you from devastation down the road. Of |
| proprietor independent contractors. The reason for this | | | | course, not every business gets sued, but why risk all |
| is that many large companies secure independent | | | | you have in exchange for a few hundred bucks and a |
| contractors for months or years at a time, and hiring a | | | | couple of filings per year? Owning your own business |
| individual, sole proprietor, into those positions can put | | | | is the commitment of a lifetime, so it just makes sense |
| the larger company at serious risk. If you have LLC or | | | | to protect it, and yourself, as much as possible. |