Sole Proprietor vs. LLC in VA | Sarah Kane Photography
/Sole Proprietorship or LLC?
So you are ready to register your business and become official, but you're wondering should you register as a sole proprietorship or LLC? First you need to know the difference between the two.
Sole Proprietorship is the individual business owner with no separate entity. Meaning there is no legal distinction between the business owner's business and personal assets and liabilities, so all of the assets of the business are subject to the owner's personal liabilities and all of the owner's personal assets are subject to the liabilities of the business. Although there is no legal distinction it is a good idea to separate your business and personal accounts.
Many people refer to a sole proprietorship as a "DBA" and use those two terms interchangeably, but it is incorrect to do so. A DBA (short for "doing business as") is simply an assumed or fictitious name that the business uses which is different than the true legal name of the business. While many sole proprietors conduct their business under an assumed name, or DBA, so do most partnerships and many corporations and LLCs. A "DBA" is not a form of business entity; it is an attribute shared by many types of entities.
What is an LLC?
limited liability company (LLC) is a form of business entity that limits the liability of its owners. Features of an LLC is the owner of the LLC has limited liability for the entity's debts. Basically an LLC separates your business from your personal assets. So if something happens to the business your personal assets cannot be touched.
There are advantages and disadvantages to both, but in my personal opinion it's always best to protect your personal assets and become an LLC right from the start. Some people operate under the notion that their business insurance is all the protection they need, but what if you are sued beyond your insurance claim? What if you are sued by multiple people? What if your business goes bankrupt? Insurance can only protect you so much.
Adapted from http://www.limitedliabilitycompanycenter.com/
Read More:
How to file as an LLC in the state of VA
Everything you ever wanted to know about Sole Proprietorship VS LLC