LLC vs Corporation vs Sole Proprietorship

Sep 06, 2007 1 Replies
M

Hi,



I'm interested in starting a small web services business, and I'm tempted to go into it as a sole proprietorship. It just seems like a very low effort way to get started, without having to do all the paperwork required for an LLC or corporation. But I won't have all the protection of a corporation of LLC. As a web services business (building websites, search engine marketing, etc.), do I really need any of this protection? Could I just buy some cheap insurance instead? Will it be easy for me to incorporate later? Any advice is appreciated.



Thanks.



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P

"mike" wrote

It's always easier to step up, from sole-proprietor, to LLC, to partnership, to corporation, than it is to step back down.

If you don't have any employees or subcontractors working for you - meaning you're doing all the work - then you will most likely be named personally in any lawsuit, and your personal assets are generally at risk regardless of the entity of choice. You see, the entity can't protect you from your personal actions. Obviously a good insurance policy that covers liability as well as your equipment, etc. is important.

At some point in time a corporation might be the best option for you, but you should make that decision on down the road, after you know how the business will fare.

In the meantime, consult with a local attorney about being retained to draw up your contracts, etc to protect you (or limit damages), and find a good CPA or EA to help set-up your accounting systems and policies as well as provide tax preparation.

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