A sole proprietorship has a single owner and is easy and affordable to set up with little paperwork. Sole proprietors have complete control but also bear all losses personally.
Pros and Cons of Sole Proprietorship
- Pros: Complete control and flexibility
- Cons: Personal liability for debts
- Tax requirements are simpler
- No need for an Employer ID number
Setting Up a Sole Proprietorship
- Sole proprietors run their companies alone, make all decisions, and have low start-up costs.
- Legal and financial obligations fall directly on the owner.
- Individuals don’t register with states like LLCs do. They choose a name, get licenses, and start.
Should I start an LLC for my side hustle?
Benefits of an LLC
- LLCs can choose how they want to be taxed, leading to potential tax advantages.
- Gain liability protection and credibility.
- Low filing costs and potential tax write-offs.
Asset Protection and Formality
- An LLC protects assets if sued.
- Operating Agreement outlines rules and resolves potential issues.
- Being an LLC can boost confidence in business dealings.
Conclusion
Starting an LLC offers credibility, asset protection, and potential tax benefits for your side hustle.