Six steps to move forward
- 1.
Understand the two starting points.
In the US, a sole proprietorship generally means an individual operates without forming a separate legal entity; personal liability can remain. An LLC is a state-created entity that may separate some liabilities when maintained properly. Neither label alone tells you your tax treatment.
- 2.
Get advice for your situation.
Discuss liability, ownership, costs and taxes with a qualified professional. An LLC does not remove every personal risk, and a sole proprietor may still need registrations or permits. Do not pick a structure just because another founder did.
- 3.
Check the rules where you operate.
Use official state and local sources for business names, licences, permits and any home-business rules. If you sell elsewhere, check relevant obligations there too. Record the source, renewal dates and questions you still need answered.
- 4.
Separate and record the money.
Check whether you need a tax ID for your circumstances and what your bank requires. Set up suitable business banking and a simple way to record income, expenses and receipts. Confirm tax and reporting obligations with an accountant.
- 5.
Set expectations in writing.
Prepare scope, payment, cancellation, delivery and refund terms appropriate to your offer. Consider privacy obligations if collecting personal information. Have legal drafts reviewed; a template cannot know the facts of your business.
- 6.
Check cover and keep a setup folder.
Ask an insurance professional about risks linked to your work, product or premises. Store registrations, policies, reviewed terms and renewal reminders in one place. Revisit them when the offer or location changes.