Sole proprietorship or LLC??

[Hkustoms]

Hello everybody, I have a few questions for you all. I am starting an automotive restoration business by myself. I plan on working alone for a few years and see how everything goes before thinking about hiring helpers. Would being a sole proprietor or doing an LLC best fit my needs? What are the pros and cons of each? Right now I am doing it on the side and I feel comfortable enough to go out on my own. I will be getting my business license in the next week or two.
Thanks in advance everybody.

[vangogh]

Setting up as a sole proprietor is the easiest way to set up. You really don't have to do anything other than declare your intentions to yourself. Specific industries will have some additional rules you have to follow. The IRS will see you as an individual. You just fill out different forms come tax time and pay estimated taxes a few times a year. An LLC offers some limited protections for things you own outside of your business like your house and car, assuming you own both.

Here's a good site about LLCs (http://www.limitedliabilitycompanycenter.com/) that should help you understand the pros and cons of forming an LLC.

[turboguy]

I would agree with Vangogh that a sole proprietorship is the easiest thing to do. There are a few things that you may need to do however. One is if you are going to use a name other than your own name you would probably have to register a fictitious name. For example if you are going to operate as John Smith you are fine. But if you want to be SuperS Web Design you register the name with the state and are legally John Smith D.B.A. SuperS Web Design. (DBA stands for doing business as). If what you are doing is something that is taxable you would need to register with the state to collect sales tax. That is free and easy. You might want to check with your city as well to see if they require any kind of licensing. None of that is very expensive or time consuming.

[bizcoachsteve]

It's really more of a legal question than anything. An LLC owned by one person is known as a "Single Member LLC" and, by default, is taxed as a sole proprietorship which is the easiest from a tax perspective while you get going. I'd consult with an attorney as to whether this might be a good idea from a legal perspective.

[WarrenD]

Like bizcoachsteve says above, a one person LLC is essentially a sole proprietorship with more paperwork. If you're planning to work alone for a few years, then no point in unnecessarily burdening yourself with the extra paperwork. If things start going better or faster than expected, you can always switch. Until then it's better to stick to a sole proprietorship.