LLC versus Sole Proprietorship

[fofazoju]

I used the search function and was surprised this topic has never been discussed!

I've been on the IRS.gov website and cannot for the life of me fully understand the exact differences between an LLC and Sole proprietorship biz. My vague understanding (to which I would like some clarification on) is that if something went wrong with an LLC business, then 100% of fault would never lie (lay?) on you, because technically you are not the sole owner. With a sole proprietorship, everything is on you because alas, you are the sole proprietor.

What are the laymen's benefits of one over the other. If it matters, I live in Va. I am preparing to talk to a lawyer but if I can have some more input beforehand I'd love it.

Oh and I am looking to start a portraiture business - mainly children and families and will not be operating in my home or a studio.

Thanks!

[Niresangwa]

Obviously consulting with a lawyer is your best option, however you can read a basic overview that's simple to understand here.

There seems to be a popular opinion that working under the guise of an LLC will indemnify you against legal action if something goes wrong, but it's not water tight by any means. If someone brings a suit against the LLC it's only liable up to the value of it's assets, that's not to say a suit cannot get around this by pursuing the individual.

My choice to go with a LLC was based on the tax breaks they're afforded.

[BuddhaPi]

you might also want to run this by your accountant as well, as each has different tax benefits / pitfalls aside for the legal side of things..

[fofazoju]

Thanks peeps! Yah I guess Ill just see what they say. Ugh, this is the part I hate!

[velvet4269]

There's the reverse to this, as well. If, for some reason, they place any kind of garnishment or levy on your PERSON (not the business), as a sole prop, they can also tie up the funds in your business account _as well as_ your personal accounts.

Unless you have employees, you'll be using your SSN for the business Tax ID, whereas with an LLC, you'd have to get an EIN (even if you don't have anyone else working for you).

I used to have a handy chart, years ago, with the differences & the benefits of each type of business classifications, but it's been many, MANY years since I took the Business Accounts class, and things have since changed. An accountant and/or attorney would be the best route to go.