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Should your business be an LLC or a sole proprietorship?

If you want to open a business in Pennsylvania, one of the first things you must do is register with the state. Before you register, you should decide what sort of business structure you want to use. Certain legal and tax considerations may be different depending on which type of business structure you choose. If you are the only one who works at your business, chances are you will register as either a sole proprietorship or an LLC.

The Pennsylvania state government provides information on different types of business structures. Most small businesses usually fall into one of four categories: sole proprietorship, partnership, limited liability company and corporation. According to the state, a sole proprietorship is the simplest type of business structure, which may be a good choice for you when you are just starting your small business. In a sole proprietorship, you maintain complete control and responsibility for the business. This structure requires few registration forms, and it is simple to discontinue the business if you need to. Although you would generally retain all the profits from your business, you would be personally liable for all business debts and legal issues.

If you do not like the idea of having your personal finances tied to your business liabilities, you may want to form an LLC instead. In a limited liability company, you would not be personally liable for the debts or legal issues relating to your business. You do not need to hire more people to form an LLC; you may continue to operate your business like a sole proprietorship. However, filing taxes may be slightly different.

This information about business structures is intended for educational purposes and should not be interpreted as legal advice.  

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