If you’re thinking of creating a business, then you might be aware that there are various types from which you can choose. If you are thinking small, then a sole proprietorship or a partnership may be appealing to you, as there is usually less paperwork and fees involved. However, there are some pretty profound differences between the two, so let us explain the difference in more detail before you make any final decisions.
When filing for a business as a sole proprietorship this means that you are the only owner and operator of the company. That also means you won’t yield to anyone else to make decisions about anything regarding your business. However, as a partnership, your agreement will dictate who is responsible for what, and many times it will require both partners to sign off on any idea that affects the business as a whole.
While starting a sole proprietorship is easier initially, it does mean that your company’s assets are linked to your own. As such, if your business ever goes into debt, you may be liable to pay it back out of your pocket, even if you don’t the money. A partnership usually functions in the same way, except both owners assume financial responsibility.
As a sole proprietorship, it can be difficult to secure extra funds should the need arise. In some cases, if your assets are tied to you directly as opposed to with a separate entity (using an EIN), then banks may not lend to you, or at least not as a business. Also, since you cannot share any stake in your company, it’s hard to find investors. Partnerships do not have that problem as you can add partners when necessary.
In the end, if you are confident that you are the only person who will be responsible for the business, a sole proprietorship may be the way to go. Otherwise, if you think that other people will get involved anytime down the road, a partnership or a corporation is a better option. If you want to find out how to file for each of these or how to get a tax ID number, visit www.govdocfiling.com today.