An often overlooked decision that should be made early in planning the start of a business is what type of business entity should be used.
The most common types of entities are LLC, Corporations or S-Corps. Each type of entity has its pro’s and con’s. There is no business entity that is right for every situation. Do some research or talk to an attorney about the specifics of what you are trying to start to make sure you choose the right type of entity for your business.
One trap that people fall into often, way more than they should, is using a sole proprietorship as their business entity. It’s easy to understand why people do it; they don’t have to make any decision about what type of corporate structure they want and it’s by far the easiest entity to set up because there isn’t much to do other than start operating. The problem with a sole proprietorship is that it offers no separate entity protection, meaning one lawsuit and you can lose all your assets, both business and personal.
The point is to put some thought into what entity best suits your needs, seek outside advice if you want more piece of mind and always avoid a sole proprietorship.