Why One-Owner LLC is better than Sole Proprietor from Linda Keith on Vimeo.
Well, I think so and here is why.
Downside of a sole proprietorship
If a Schedule C is filed by a sole proprietor, what we know is that sole proprietor has unlimited liability with regards to that entity. Anything that goes wrong can come back against them and their personal net worth or any other activities they are involved in.
How can you tell it is an LLC
If when you look at the Schedule C or F it has the name of the company and LLC after it, this means it is a one owner Limited Liability Company. That means that unless they have personally guaranteed debt, they have limited liability should something go wrong in the business.
Here is what that actually tells me.
Getting professional advice…and taking it
Number one, they probably got professional advice because just in general people will do the simplest thing. If it is a small business just start a sole proprietorship.
If they have started an LLC, someone has advised them to do so in order to mitigate risk. Which means the owner is taking steps, active steps, to mitigate risk. Not only did they get professional advice, they took it.
Risk mitigation is a good thing
So I would rather see a one-owner LLC than a sole proprietorship on a Schedule C or a Schedule F. It tells me the owner is mitigating risk, has professional advisers and actually takes some of their advice.
