Avoid Legal Nightmares By Making Your Private Practice An LLC vs. Sole Proprietorship
Today we are going to give you the reasons you should make your private practice an LLC vs. a sole proprietorship.
Jumping into the legal side of opening your private practice is extremely intimidating.
You want to make the right decision and protect yourself as best as you can.
Making the wrong choice here could mean you losing your house down the line.
Before we jump into all the reasons why being an LLC is the right choice for you let’s cover the basics of what this decision is about. We used a definition off of thebalance.com to explain what a business entity is.
A business entity is an organization that’s formed to conduct business… Sole proprietorships and general partnerships are unincorporated businesses, while limited liability partnerships provide some liability protection for investors.
Corporations and LLCs separate personal and business taxes and liability.
Summing it up a business entity determines how you will file your taxes at the end of each year along with how much liability you will be covered with if you ever were sued or end up in court for any reason.
Every state has different laws as to who can file under which business entity, so we recommend checking with an accountant or lawyer to clarify which options are available to you.
If you have the “all clear” to file as an LLC vs a Sole Proprietorship, DO SO!
Let me explain why I stand so strongly on this subject.
A sole proprietorship is the easiest option, there is no paperwork to be filled out and you can start operating when you are ready.
When you choose to operate as a sole proprietorship you are saying that you and your business are the same.
So when you file your taxes at the end of the year those taxes would be done together.
This means you only pay typical income taxes which is nice.
The worst part of a sole proprietorship is the liability of it.
Since you are starting that you and your business are the same things, if someone were to sue you they can take everything. For your business and personal life.
The reason I say be an LLC is if you are sued for something in your business, they can only go after your business assets and not your personal assets including your savings, cars, and house.
Those things will all be safe.
The same would be vice versa for you if you were sued in your personal life.
Another huge pro of being an LLC is you only have to pay taxes on certain things once.
The cons of an LLC are it is a lot more paperwork, and the application process is long.
If you do get sued as an LLC, you have to be able to prove that your business is completely separate from your personal life.
When you file your taxes at the end of the year, you would file you and your business separately.
This means you need to have separate accounts, for everything as well as make sure that you are paying yourself with a cut check.
If you fail to keep these legally separate if you are to get sued they can use a loophole to go after all assets.
Leave us comments on how this video broke down why you should be an LLC and your opinions on the subject.
