For individual small business owners like yourself, you may be faced with the question of: should I register my business? Do I need to? Why would I want to? These are all great questions!
Here's information on your options and the pros and cons.
A sole proprietor is the personal owner of a business, and all its assets. There is no separation, legally, between a business and the person. This is only an option if it's just you working on your business. For instance, you are a certified yoga instructor and you teach classes via Zoom from home, or you are a freelance web designer working with a few clients ongoing.
The benefits of being a sole proprietor:
The cons of being a sole proprietor:
As a sole proprietor, you can do more than the bare minimum as listed above. For instance, you could open a business credit card to use only for business expenses (great for keeping track of tax deductible items), but from a legal perspective, you're on your own.
An LLC is a limited liability company, a legal entity formed to own and operate a business. They're great for individual business owners and even as you grow the company and add additional members.
The benefits of forming an LLC for yourself are:
The cons of forming an LLC:
Want to form an LLC? There are ways to do it pretty easily - and not expensive ($50-200 if you do all the paperwork yourself).
When you're just getting started, don't worry that if you don't do this tomorrow - something bad is going to happen! But, if you start getting customers and see your schedule fill up and your bank account getting an influx of money (for instance over $600 - you are supposed to file for any income over this amount), then, understand your options!
If you're treating your business as something on the side and not your main source of income, get acquainted with sole proprietorship and how to prepare for taxes as a contractor/freelancer. But, if your business is your full time, let's get to work business, then definitely look into forming an LLC to protect yourself and legitimize your work!
Accounting tools: Free or inexpensive tools to help with managing your budget; from profits, overhead, cost of service, marketing, and more, an accounting tool is your new best friend. Of course it's important to forecast and as much as it's necessary to keep track of payments in a detailed way for your quarterly taxes.
Legal tools: Depending on the service you provide, it's important to have access to legal documentation, contracts, and more at an affordable price. Utilizing a legal tool like DocuSign or Rocket Lawyer is a great way to have a secure and legal relationship with clients, without breaking the bank.
There's a lot of information out there that can seem overwhelming when you're beginning a business. Take the time to do some research and decide based on the income you're making and the nature of your business, if it makes sense to form an LLC. At a certain point, it's an important distinction to make, and a responsible choice legally.
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