It’s a great time to be an entrepreneur. Millennials and technological innovations are fueling the rise of all kinds of new businesses and business models. Every day, we hear how these things are disrupting old traditions and creating space for new ideas.
These changes are as present in Boston as they are anywhere. We see their influence in the gig economy and in stories about the rising popularity of co-living spaces. These changes are transforming the city, but they don’t come without risk.
One of the first decisions you’ll make as a budding entrepreneur is how to structure your business. The choice matters almost as much as your plan for making money because your business structure has a huge impact on the day-to-day considerations you’ll face while running your business:
- The amount of paperwork you need to file
- The taxes you’ll owe
- The amount to which you could be held responsible for losses and lawsuits
- The way investors may regard you
The state lists the five most common business structures on its website and offers an overview of each. Here, though, we want to look more closely at the limited liability company (LLC) as it compares to sole proprietorship.
What is sole proprietorship?
Sole proprietorship is the simplest and most common way of doing business. In most cases, you don’t need to file any paperwork in advance. As soon as you start working as your own business, you’re a sole proprietorship. The government doesn’t make any real distinction between you and your business.
How is a limited liability company different than a sole proprietorship?
LLCs differ from sole proprietorships in several key ways:
- In most cases, LLCs protect their owners’ personal assets from business debts or civil lawsuits.
- LLCs must register with the state. They must file annual reports and pay filing fees.
- Each owner of an LLC handles his or her own share of the company’s taxes.
- An LLC’s ownership is flexible, and your operating agreement may allow for investors to come onboard.
The first and fourth of these distinctions are often especially appealing to entrepreneurs looking to take risks in new and emerging businesses. Many breathe easier knowing they shouldn’t lose their homes as the result of unforeseen business failures. And it’s hard to overstate the importance of positioning your new real estate business for potential growth from its very outset.
LLCs and Boston real estate
Boston’s real estate market has been attracting millennials for years. It’s full of potential, but also riddled with hidden risks. If you’re interested in exploring a future as a real estate entrepreneur, you’ll want to consider your business structure carefully. An attorney experienced in both business law and real estate can help you explore your choices and set you along the right path for your future growth and success.