Sole Proprietorship vs. Incorporated

[Katyxa]

I have been doing photography as a hobby for many years. But now, I finally decided to make it official and open up a business. I would like some advice in terms of what is better, to register my business as sole proprietorship or incorporated? I want to make sure I get qualified for business insurance to cover any accidents that may happen to my equipment or clients. I have some people telling me I should go with Incorporated, since in case of any law suit, God forbid, my personal assets won't get taken away, just my business assets may be considered. Others say I should go with sole proprietorship.

Would love to hear what you, guys, think about it and your personal experiences.

Business Overview:
I'll be specializing in maternity and children photography.

[kirbinster]

Sole proprietorship is a concept from the 1800's - it should stay there. You either want to be a corporation (probably an S-corp) or an LLC (limitted liability Company). You should consult your accountant on the realative merits or each. One issue revolves around self-employment taxes.

As far a legal liability, yes it is true that if you are incorporated they cannot come after your personal property for things your business does- BUT and there is a big but here. If you do something that is negligent or illegal they can still come after you - they cannot come after you for what your assistant does.

[candleman]

Originally Posted by kirbinster

Sole proprietorship is a concept from the 1800's - it should stay there. You either want to be a corporation (probably an S-corp) or an LLC (limitted liability Company). You should consult your accountant on the realative merits or each. One issue revolves around self-employment taxes.

As far a legal liability, yes it is true that if you are incorporated they cannot come after your personal property for things your business does- BUT and there is a big but here. If you do something that is negligent or illegal they can still come after you - they cannot come after you for what your assistant does.

+1

LLC all the way, mainly for the liability issue, but in NZ there are some tax advantages too.
definatley have accidental damage and liability insurance.

"Sole trader" - you are personally responsible for... everything all debts, taxes, lawsuits...everything

LLC.. the company is looked upon as an individual.. you as a perosn are exempt from the majority of blame.

i'm sure most countries are very similar in that view.

ALTHOUGH, in NZ for the first time recently the Judge ordered a director/owner-operator to personally pay for a series of serious problems after he closed his busness to avoid liability. (he was building houses that were not water tight.. and thats not good in a wet country when you build a wooden house.)

[gturner]

LLC costs a little more to run and is subject to a lot more red tape

Most corporate governance rules have been tightened up in the last 5 years, so whilst LLC does offer a level of protection, a director who is negligent or deliberately misbehaves to the detriment of others (inclusing the taxman, clients, landlords etc) can be held personally liable. It is not the free pass so many people thinks it is.

I would get local advice from a professional as to what is best for you. If is a sideline/ start-up thing, there are many advantages to keeping it low key in the admin dept. If you want to get a studio and go big, then LLC is the answer