Sole Proprietor vs LLC: Make the Right Choice for Your Business
Summary
The article contrasts sole proprietorships and LLCs to help entrepreneurs choose the right structure. A sole proprietorship automatically applies when no formal entity is registered—offering simplicity, minimal cost, and direct personal control—but leaves owners personally liable for business debts. Earnings flow through to the owner’s pass-through return, subject to self-employment taxes. By contrast, a single-member LLC has a single-member separation between the business and the owner, thereby protecting the individual's assets. It costs more to form and requires maintaining records, but it allows for flexible taxation, enabling owners to choose between pass-through status or corporate tax treatment.
Small Business Trends
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