Many moms starting their own business can get easily lost in the process. They have a business idea but all the little details are confusing. Should they open their business as a corporation, a LLC, or a sole proprietorship?
Here’s the run down based on one moms opinion that has been there and done that, the pros and cons, and the details that can help you pick which is right for you. Before you take the plunge and make a decision though, do your homework, read as much as you can, and even take the time to meet with a professional advisor to make sure you’re making the best decision for you and your business.
What you need to know – The business lives and dies with you. It can’t be passed on or inherited, and you’re taking 100% of the risk. The business name is your name unless you file for a DBA (doing business as). This type of business may be right for you if you are staring a tiny business, you don’t plan to take on debts, and you don’t plan to pass it on one day. Profits and losses are filed on your personal tax return. If your business is every sued though, or you rack up crazy debts, you are 100% personally responsible.
What you need to know – LLC stands for Limited Liability Company. This type of company can offer protection to you personally in the event of debts or lawsuit. While LLC Taxation may seem confusing, you basically report your losses and profits on your personal income tax, as you would with a sole proprietorship. Visit the Texas LLC Pros website for more info on the tax side. If you die, this type of business can be inherited or passed on. Also, do not use your personal checking accounts for this type or you “pierce the veil” of protection.
This type of business is great if you’re going to start selling stock, you want shareholders, and your biz is going to be HUGE. If you’re a stay at home mom with a little mom and pop craft business in the home office, this type of business is probably not for you. It’s complicated. It does offer maximum protection for your personal property though, as they cannot be seized to pay off business debts. Rules and taxes are complicated. Notice a theme? It’s a complicated business type. J