How do I know if I should pick an LLC or Sole Proprietorship?
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How do I know if I should pick an LLC or Sole Proprietorship?
My wife is opening a small used clothing boutique with local items like honey, soaps etc. and we are trying tofigure which is best way to go. She is using only saved money to start and operate business, no loans, so we are thinking Sole Proprietorship but we are concerned about being sued for any reason. Should she remove her name from our personal accounts and just have the business account.
Seems like its quicker and less expensive to start with sole prop. New Link Destination
ugh decision maybe you can help clarify not sure which way to go.
Asked on February 13, 2017 under Business Law, New Hampshire
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 7 years ago | Contributor
Removing her name from the personal accounts would do nothing to stop a lawsuit against her or prevent you and your wife from having to pay a judgment against you; if she were sued and lost in court, the judgment would order her to pay--if she did not, they could go after your real estate, any vehicles or personal property you own, and even against the personal bank accounts if they learned that she was either directly or even directly receiving money from them (i.e. even through you), since that would show that money in the accounts was hers, or if they learned or suspected that she had deliberately removed her name from the accounts, since that would be an act done to defraud creditors (hide assets) and so could be reversed by the court.
Form an LLC: you can do it online in an afternoon, for a few hundred dollars, and it will provide a great deal of protection for your personal assets. The expense to open it is even a deductible business expenses.
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