You can start a sole proprietorship, which just means that you are running a business as yourself. Many people do this, especially at the beginning, when the business is just getting off the ground and they’re hoping that it can grow.
Another option, however, is to set up a Limited Liability Corporation. This is generally just known as an LLC. It offers you some protections that a sole proprietorship will not. It’s important to understand how this works and if it’s going to be the right decision for you.
You have no liability for financial debts
When you run an LLC, it means that you are not liable for the financial debt incurred by that company. This could include the business loans that you’ve taken out or anything that you’ve been ordered to pay as part of a lawsuit. These debts are held by the company itself, but not by you personally, as the owner.
If you’ve assumed that that’s always how it works – regardless of the business structure – it’s important to know that that’s not true. A sole proprietorship means that you are liable for any of the debts that the business has. It is essentially just an extension of yourself, so you may have to cover some of those debts or financial obligations yourself if the business is unable to do so. This makes it much riskier to start your company because all of your personal finances are potentially on the line.
A sole proprietorship and an LLC are just two of the different types of business structures you can use. Be sure you know how they all work, the benefits they have and how to set your company up properly.