Business Structures

• A sole proprietorship is one of the simplest business formats to understand as it simply involves a single person operating as an individual business owner. A limited liability corporation is a legal business structure that can be owned by one person or a number of people. Business partnerships are legalized business ownership structures with two or more owners. A corporation is a publicly-owned company whose owners are individual shareholders.
  
  

Benefits

• The fact that a sole proprietor is a single business owner is in itself a significant benefit. When you own your own business, you have total control over business decisions. Sole proprietorship is the easiest business to set up. In many instances, independently contracted workers operate as sole proprietorships. Aside from any state or local trade name registrations and business licenses, you typically do not have much legal documentation to establish a sole proprietorship. Plus, you include business taxes with your individual taxes.
  
  

Drawbacks

• One reason the owner of a sole proprietorship may opt to establish a limited liability corporation, or LLC, is its protection against personal liability for business risks. Sole proprietors are not legally separated from their business activities and could risk losing personal assets for business lawsuits or liabilities. Also, while you do have control over the operation of a sole proprietorship, you solely bear the brunt of making and implement business decisions and dealing with the financial repercussions.
  
  

Decision

• Many self-employed people or independent contractors operate as sole proprietors simply to avoid any hassle in formalizing as an LLC or corporation. However, if you earn significant income and face serious financial risks, the liability protection might help. You might also consider insurance protection for your business if you engage in activities that could cause you to face product or service liability for your business activity. In essence, a sole proprietorship offers control and ease, while LLCs and corporations can provide more personal liability protection and allow for partners to take on some risks.