The most important of all the benefits is the protection of your personal assets. Once you register your business, you have a definitive separation between yourself and your business. The benefits of registering your business outweigh the risk. With sites like Incfile, the process can be extremely easy, and filing fees are not expensive to form an entity. When it comes down to it, it is in your best interest to register your business. The Benefits of Forming a Business Entity You could be put on probation where you can’t reopen your business for a certain length of time.You could be told you’re not allowed to ever reopen your business.You could reopen your business once you get the license(s) needed.Either way, this (if caught) could force you to close your business. This could be on purpose or simply because you didn’t understand the benefits of starting an LLC instead of a sole proprietorship. On top of not registering your business, you may also decide to forgo getting the proper licenses needed to conduct business legally. In court, the fact that you didn’t register your business will not look good and could actually come back to bite you in the rear-end. If you have zero protection, someone can take you to small claims court and actually sue you for not liking your product and claim fraud (especially if you don’t have a business license). If something happens to your business and someone sues you for $5 million and you don’t have the money, they’ll take your car, your home and anything they can to pay off the debt. It has been reported that 43 percent of small business owners have been threatened with or involved in a civil lawsuit. This means that if someone decides to sue you or you cause damage to property or bodily harm, you are 100% responsible for paying to settle those issues. If you do not register your business and decide to move forward with a sole proprietorship or sole trader, you are essentially on the hook for everything.
Below are some things you need to take into consideration so you understand the risks and liabilities involved in being a sole proprietorship or sole trader. The Risks When You Don't Register Your Businessįorgoing the route of actually registering your business does come with some negatives that could cause you to realize it may not be the best situation for you and your business both in the short-term and long-term. However, as long as you get all of your required licenses to conduct business and follow all of your tax requirements, running a sole proprietorship or sole trader is completely legal. Note that to stay legal, you will need to register your business with your state for tax purposes (you should always check the regulations and terms of your individual state). This is a bit unorthodox, and many businesses will not want to work with you if they see it as unprofessional or lacking in credibility. What this means is that you will need to use your personal social security number and your personal legal name to conduct business. If you decide to start a business but do not actually register it, you are considered a sole proprietorship or sole trader. But first, let’s talk about what happens if you don’t form an entity. When you start a business, it is always recommended that you register your business. What Happens If You Don't Form a Business Entity
Have I lost you? There’s some gray area when it comes to not having an official business entity. The short answer is no, but the legal answer is yes. It’s quite common when people are looking to start their own business to wonder if you need to form an entity.
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