Should I Register My Business as an LLC or a Sole Proprietor?

You're starting a small business, one of the first questions is:
Should I register as a sole proprietor or form an LLC?

Both options are legal ways to operate a business, but they offer different levels of protection, tax benefits, and responsibilities. Let’s break it down so you can make the right decision for your business.

What is a Sole Proprietorship?

A sole proprietorship is the simplest and most common structure for small businesses.

• You don’t need to file legal paperwork (except maybe a local license or DBA).
• You and your business are considered the same person in the eyes of the IRS.
• You report profits and losses on your personal tax return (Schedule C).
• Taxes are simple, but there's no legal separation between you and your business.

What is an LLC (Limited Liability Company)?

• An LLC is a legal business structure that separates your personal assets from your business.
• You must register with your state (e.g., Florida, Texas, etc.).
• You can choose how you want to be taxed (as sole proprietor, partnership, or corporation).
• You get limited liability protection — meaning your personal savings, car, or home are better protected.
• Slightly more complex, but offers more protection and flexibility.

Key Differences

What Should You Choose?

Choose Sole Proprietor if:

• You're just starting, testing a small idea, or want to keep things simple.

Choose LLC if:

• You want to protect your personal assets, build a brand, and plan to grow.

✅ Final Thoughts

Choosing the right business structure is a big step. While starting as a sole proprietor is easy, forming an LLC offers protection and flexibility as your business grows.

At Naebom Business, we help entrepreneurs understand their options and set up their business correctly from the beginning.

Need help registering your business?

Let Naebom Tax Guide help you take the next step with confidence.

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