Forming a sole proprietorship can be one of the most basic and simple business entities to form. Depending on the type of work that you offer, you may be required to obtain licenses, permits, zoning clearances, or other authorizations from your state or local government. If you choose to do so, you can establish a legal entity and file an presumed title for your business, and to make filing your taxes more convenient, obtain an EIN (employer identification number).
Which is Better Entity for Your Business: a Sole Proprietorship or LLC?
However, forming Limited Liability Company (LLC) is a little more of a complex process, but overall a basic process in the grand scheme of things. You will be required to select a legal name your LLC, and since the name of your business must be unique, it is a good idea to confirm with an attorney, so that you do not inadvertently involve yourself with trademark infringement. You will also be required tp select a registered agent. Your registered agent could be yourself if you are an individual-member LLC, or one of your business partners in the case of a multi-member LLC.
As a Limited Liability Company (LLC), you will be required to file articles of incorporation and establish an operating agreement, as well as the cost incurred with a filing fee. Possessing a business plan to implement can make components of this step much more convenient as you form an LLC. In some states, it will be necessary for you to obtain your EIN for tax purposes.
In the next article, we will discuss Taxes and Financing of a Sole Proprietorship vs LLC.