Small Businesses: Sole Proprietorship or LLC?
Business owners often start up quickly as a sole proprietorship and do not consider the implications from having their personal name associated with the business. If given the choice, wouldn’t you want to separate yourself personally from potential liabilities of your business?
A limited liability company (LLC) is one such strategy: an LLC has its own unique name, has its own federal employee identification number, and can create a barrier between the individual who owns the business and the business name itself.
In contrast, a sole proprietorship usually lists the business owner’s personal name, and this is reflected on the business’s insurance policy.
If someone slips and falls at your business, do you want the business or the individual business owner to face the liability costs? If your name is listed on the business’s title (as in a sole proprietorship), it may open you up to being sued personally!
Talk to your agent or broker today about the insurance advantages and disadvantages of the different ownership designations available to you.