Sole Proprietorship vs. LLC
A sole proprietorship is owned by one person. To start, use your Social Security Number as your ID. Report profits and losses on your tax return. A sole proprietorship has no legal distinction between the owner and the business. The owner is responsible for all liabilities.
An LLC offers protection for owners. The LLC owners’ assets are protected if sued. An LLC combines limited liability protection with flexibility.
For taxes, a sole proprietor’s income is taxed on their return. A single-member LLC is taxed the same way.
Business Structure Comparison in Virginia
A sole proprietorship is a business structure in which a single individual owns and operates the business. The owner is responsible for all decision-making, profits, and liabilities. There is no legal distinction between the owner and the business, making the owner liable for any debts or issues.
An LLC combines liability protection with flexibility. An LLC protects owners’ personal assets if sued.
While sole proprietorships have some advantages, there are disadvantages to be aware of. A sole proprietor is liable for all business debts. Sole proprietorships do not have liability protection like LLCs. Instead, the owner has liability for all debts and issues.
An LLC versus sole proprietorship comparison is a must to make an informed decision regarding your business structure.
For federal tax purposes, a sole proprietor’s net business income is taxed on individual income tax return. A single-member LLC is taxed the same as a sole proprietorship.