One of the main reasons that business owners form limited liability companies (LLCs) is to protect their personal assets from any business claims. That protection is referred to as a liability shield.
Sole Proprietor is Simple and Popular
Sole proprietorships are by far the most popular business entity in the U.S., with approximately 27 million businesses listed as sole proprietorships.
States Want Control
Deciding on the proper structure for a new business in each state: sole proprietor, partnership, limited liability company (LLC), corporation, or trust; will depend on the type of products or services your business will provide, the style of business, and the financial situation. Consider these factors when deciding on a business ownership structure:
If you are starting your business without a lot of capital, you may wish to choose a simple structure, like a sole proprietorship, partnership, or trust. More complex corporate structures like corporations and LLCs are more expensive to maintain, and require certain operational formalities that may not be needed if you have a simple business.
If your business is inherently risky - for example, medical products, supplements, exercise, diet, stock trading, or construction; you will probably want a business structure that protects your personal assets from business claims, like a Limited Liability Company (LLC), Corporation, or Private Asset Protection Trust. This can keep the family finances and relationships in a safer zone.
Taxes on business profits for partnerships, LLCs, sole proprietorships, and many trusts are all reported on the personal income tax returns of their owners, who must pay income taxes on all net profits. Corporations pay corporate taxes at special rates on any profit at year-end, and are usually higher.
With a separate structure, you can create shared ventures, with shared risk, with shared duties, and with shared benefits. Many times the shared items are equal or non-equal. You can make up your own sharing plans. Organizations can also borrow, pledge, or sell shares in your business to raise investment capital. Much more flexibility.