People who want to start a business have to consider several points before they open the doors. One of these is the type of business structure they’ll use. Two that are common are the sole proprietorship (SP) and the limited liability company (LLC).
Both of these structures are useful for people who own the company by themselves. It’s critical for them to understand one major way they differ so the new entrepreneur can determine what option is best for their situation.
Division of Personal and Business
One of the primary differences between SPs and LLCs is how personal assets are affected. In the SP business structure, there’s no division between the assets of the owner and the business. This means that the business owner’s assets, including their home and vehicles, are at risk of being seized if the business is sued and has a judgment placed against it.
In the LLC structure, there’s a division between the business and the owner’s assets. This can provide the owner’s assets with protection, so they won’t be seized if there’s a judgment against the company.
The division means that even if they lose the company’s assets, they’ll still have their own personal assets. While it takes a little extra time and effort to start a business using the LLC structure, many emerging entrepreneurs want to take advantage of that protective division of assets.
Starting a business is a major undertaking that requires considerable planning. Having someone on your side who fully understands start-ups and how to manage the legal side of matters can give you guidance and peace of mind.