Sole Proprietorship
A sole proprietorship has one owner. It’s the simplest structure. A sole proprietor is personally liable.
Benefits
A sole proprietorship is extremely popular as it’s the easiest to create. Sole proprietors only have pass-through taxes.
Limited Liability Company (LLC)
An LLC is separate from its owners. It provides benefits like asset protection. LLCs allow flexible taxation. Owners can choose pass-through taxes or corporation taxes.
Benefits
An LLC requires more paperwork, money, and effort to establish, but offers liability protection. Both LLCs and sole proprietorships allow finances separation.
Comparison and Decision-Making
Sole Proprietorship vs. LLC
Is an LLC or sole proprietorship better for 2023? LLCs offer liability protection but require more paperwork and fees. Sole proprietorships are simpler and cheaper but don’t offer liability protection.
Tax Considerations
Do LLCs pay more taxes than sole proprietorships? No. An LLC can choose to file taxes like a sole proprietorship, whichever benefits the owner most.
For those seeking liability protection or control, either an LLC or sole proprietorship may be suitable. Now you can make an informed decision. Forming and filing taxes for an LLC costs more than for a sole proprietorship. An LLC offers similar tax benefits to a sole proprietorship, but it also provides liability protection.