What is the best way to start a business/company as one person?

My answer to What is the best way to start a business/company as one person?

Answer by Raad Ahmed:

Great answers all around. I’ll speak about some options from a legal standpoint when starting a new company.

A solo operation has the following operations presented to them:

Sole proprietorship

A business owned and managed by a single person where there is no legal difference between the individual and the business.

Pros

The cheapest type of business to start. Simplest form of a reporting and operational perspective.

Cons

The proprietor is personally liable for all liabilities the business incurs. No tax advantages compared to other business entities.

LLC

Not a corporation rather an entity that provides liability protection for its owners.

Pros

An LLC provides greater personal liability protection when compared to a sole proprietorship by establishing the LLC as a separate legal entity from the owner. Require less reporting and record keeping obligations than a corporation, but more than a sole proprietorship .

Cons

More expensive to set-up and maintain when compared to sole proprietorships Taxed the same as a sole proprietorship.

S Corporation

A legal entity that is separate from its owners, employees, and shareholders.

Pros

A business entity that is legally separate from its owners, therefore, providing insulation from liability.

Does not pay separate corporate tax, rather Income or losses are divided among the shareholders and passed to each person’s personal tax return.Interests can be freely transferred without triggering adverse tax consequences.

Cons

Can have only one class of stock, thus cannot have different classes of investors who are entitled to different dividends or distribution.

Cannot easily allocate losses or income to specific shareholders.

When you’re ready to incorporate, feel free to check out LawTrades. We connect early stage entrepreneurs like yourself to highly vetted business attorneys to legal is the last thing you have to worry about when growing your company.

Best of luck with the new company!

What is the best way to start a business/company as one person?

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