The beauty of entrepreneurship is that it is available to anyone. Many new business owners start their business without any legal entity structure, such as a Limited Liability Company, S-Corporation or Corporation. While an entity structure is not necessary to operate your business, it does protect you and your family.

Some of the benefits of the sole proprietorship are:
1. Easy to form. No legal paperwork involved. You decide to start your business and you start working.

2. Ownership controlled. Since you are the sole owner of the business you maintain all of the control.

3. The sole proprietorship is reported directly on your income tax return via the Schedule C; therefore, there is no separate filing requirement.

However, there are some significant detriments to the sole proprietorship:
1. Unlimited liability. This means if someone wants to sue you they can go after your business assets as well as your personal assets. Since there is no corporate structure, such as an LLC, S-Corp, etc. your personal assets are entirely exposed.

2. You have limited resources. Since you are the sole owner of the business you may not have the capacity to accept larger projects or your skills may be limited to a particular area.

Is it okay to operate for a few months as a sole proprietorship? I say NO. Setting up an LLC is very easy and fairly inexpensive. You can do it your self or hire a business that specializes in entity formations or attorney to do it for you. The cost really is not prohibitive, for example, if you do it yourself you can incorporate as an LLC for around $100. Most states recognize single member LLCs so you will establish some legal protection for you and your family.

If you are operating as a Sole Proprietorship, I recommend that you add an item to your to-do list; incorporate your business TODAY. You’ll be glad you did.