I am getting prepared to open my chocolate company legally. It will be a side gig to my full time job and I don't expect it to be huge anytime soon. I was wondering what business structure makes the most sense to start with, Sole Proprietor or LLC. What business structure did you start with and why?
I went with sole proprietor and liability insurance to get things started. It's as simple (and affordable) as it can get. LLC is best if you're in a partnership and/or need to share ownership. The extra protection is helpful but as I was told by a mentor it all comes down to the name(s) attached to the LLC. When collectors come knocking they will find the means to get what they want. Good luck!
Did you change to an LLC after a while? If so, when did you decide to change structure?
Nope, still sole proprietor. I don't have any plans to change unless I decide to share ownership.
We went with an LLC too. Keep everything separate. You need the insurance too. It's not that much money. You can file the papers yourself if you want to keep costs down. Better to be covered than open to problems.
Just to add onto what Corey said. When I first went to file for an LLC, I checked out legalzoom.com, and WOW it's a ripoff. They up-charge and overcharge at every part of the process, so I'd recommend taking the time to do it yourself. NJ, for example, had a pretty user friendly website that explained the process in a clear manner. It was a couple years ago, but from what I remember, it would have been $250-$300 through legalzoom and it ended up being $80 to do it myself. No idea what you'd spend for a lawyer to file; I might be wrong, but a lawyer seems like overkill for something like this.
I have a local lawyer who will do it for $300, and I think I can do it for $100... Still doing research. And because it's just me I don't need an operating agreement.
I have been an S corp for 24 years. I should have stayed sole proprietor. It would have saved me 100 grand by now in expense. One learns one needs lots of insurance anyway. Lawyers pierce the corporate veil easily and as I said- liability insurance is still needed and I also have a 2 million umbrella.
He said he's an S Corp...
My thought is that setting up the LLC costs more up front, and I'll have liability insurance, so it seems like starting out as a Sole Proprietor would be easier and then switch over to LLC after I have more funds...
You find out how much more it is to pay accountants, pay NYS franchise taxes, plus everything else you encounter when you have a corp. vs. a sole proprietorship.