Sole proprietorships are the most popular business organization structure. Why? The most common answer appears to be “it’s easy” or “it’s cheap.” While these two statements are true, the reality is that ease and cost put your assets (and viability) at risk if you are sued. After all, a sole proprietorship is nothing more than an extension of you.
Another response is that other organizational structures are complicated and more costly. Yes, this is true, but wouldn’t you pay at least $500 to protect your house (homeowner’s insurance), your car (auto insurance), or your life (life insurance)? Then why is it so difficult to cough up somewhere around $1,000 to organize a corporation or limited liability company and approximately $500 per year (varies by state) for minimum taxes assuming you choose a pass-through entity (such as an S-Corporation or LLC)?
Maybe these entities just aren’t ever considered as an option and more awareness is needed. The reality is, if you aren’t willing to invest a little extra time or money into your own business to set it up right, you are only setting yourself up for failure.
For more information on how to set up a business, plan strategically, and be successful, please contact us by visiting our website at www.mokercpa.com.