I recently had a call with Sam, who is thinking of starting his own home-based tutoring business. He asked me if he should form a legal entity like an LLC.
There is not a one-size-fits-all answer for every business because no two businesses are alike.
Without forming a legal entity, his business would be a sole proprietorship. The main LEGAL disadvantage of a sole proprietorship is that the owner gets no protection from business liability. But that may be perfectly fine for a low-risk type of business like tutoring.
As a business attorney I have advised thousands of clients on risk and potential legal consequences, so they can make an informed business decision. That’s just the legal side. There are also tax issues to consider.
If you’re thinking of starting a new business in the new year but not sure whether you need to form an LLC, ask yourself if you like doing things the simplest possible way? Then find a great CPA and then give me a call to talk about the specifics.