Basic Training: Yearning to Start a Business, But in Which Legal Form?

Nina L. Kaufman, Esq.

Nina L. Kaufman, Esq.

Nina L. Kaufman, Esq., owner of Ask The Business Lawyer, is an award-winning business attorney, speaker, and Entrepreneur Magazine online contributor. She saves consulting and professional services companies time, money, and aggravation by serving as their outsourced legal counsel.

Posted on August 28, 2017 in Planning & Advisors

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Q: I am starting an online retail store. I thought about filing my status as a sole proprietor.  Eventually I will change my status to an LLC when I have a physical store. Should I go ahead and file as a sole proprietor or should I just file as an LLC now?

A: Particularly for those doing business online, I encourage entrepreneurs NOT to do business as sole proprietors. Your business will have global reach being online, and I think having an LLC is an important layer of protection–separate and apart from insurance. This way, should anything happen, whether with customers, designers or others, your personal assets are shielded. If the only reason not to form the LLC is the cost (In some states, the cost for LLC formation can substantially exceed those for forming a corporation), then you may want to look at whether an S Corp will serve you better, or shift your timing so that you have adequate startup capital to give your business a solid foundation.

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