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SHOULD YOU WORK AS A SOLE PROPRIETOR? By:Murray  Lobb Attorneys

6/22/2018

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​Should You Work as a Sole Proprietor?
Many professional real estate agents, accountants, landscapers and website designers are among those who regularly handle their business as sole proprietors. It’s often the easiest way to start working — although you should always check with your city and county to be sure you’re meeting all their requirements.
Before offering your goods and services to others, it’s wise to also speak with your Houston business law attorney to find out if another legal structure like a limited liability company (LLC) or small corporation might better suit your needs.
Chief Advantages of Running a Sole Proprietorship
  • You alone call all the shots. It’s up to you to make every important decision without having to answer to any partners or investors.
  • There is far less paperwork for you to file than if you formed a limited liability company (LLC), a partnership or a corporation. (However, those other legal structures usually provide better protection for your personal wealth and business assets.)
  • Your daily management tasks can remain simpler if you don’t need to hire any independent contractors or employees. Sole proprietors often have very straightforward duties tied to bookkeeping and filing taxes.
Potential Drawbacks of Working as a Sole Proprietor
  • Your business may have to temporarily shut down if you become ill or briefly incapacitated. This can readily happen unless your spouse or another responsible party is able and willing to complete your current assignments, fill all open orders – and handle any urgent business matters.
  • If other people sue you, they can often reach all your personal and business assets to satisfy any judgments entered against you.
  • If you need additional investment money, you have no partners or other immediate parties who can help supply the funds that are required.
  • You’re less likely to have an adequate support network of business mentors and consultants — unless you carefully developed one ahead of time.
To help you answer other initial questions you may have about working as a sole proprietor, additional information is set forth below. There’s also a brief reference to the new Tax Code signed into law in December 2017 that may affect many sole proprietors.
First Steps That Can Help You When Setting Up a Sole Proprietorship
  • Visit business websites popular with entrepreneurs. This may help you answer some key questions and become aware of new issues. Useful sites include the Small Business Development Center Network (NTSBDC) and the Small Business Administration (SBA).
  • Choose the best business name available. Decide whether you want to simply work using your own personal name or a professional business name. You can ask your lawyer to help you find out if specific DBAs (“doing business as”) names are already taken. You can also pay minimal fees to conduct preliminary searches on the Texas Secretary of State’s website.
  • Decide whether you need to obtain a sales tax permit from the Texas State Comptroller’s Office. This depends on the nature of the products you’ll be selling.
  • If you’ll be working in Harris County, you’ll probably need to obtain an EIN (Employer Identification Number) for handling your tax filings. You may also need an EIN when opening a separate bank account for your business.
  • Consider hiring any workers you need as independent contractors. Keep in mind that it’s much safer (for liability purposes) for sole proprietors to only hire independent contractors. If you still decide to hire actual employees, you must give serious thought to buying a general business liability insurance policy. If you have that when an employee sues you, they usually cannot reach your personal assets. Also, be aware that if you’re working out of your home and one of your employees falls and gets hurt there, your homeowner’s insurance policy will usually not cover that type of injury.
  • Decide whether you want to work out of your home, an office, or while sharing rental space with other entrepreneurs.
  • Be prepared to change your business structure to an LLC or other form when your business needs or liability concerns change.
  • If you decide to stop doing business, make sure you follow any pertinent laws involved with providing notice to all current customers and/or employees.
Changes in the New Tax Code Passed in December 2017 That May Affect You
Be sure to ask your Houston business law attorney how the new tax code changes may affect you as a sole proprietor. This may depend on whether you’re running what is considered to be a “pass-through” business.

Posted in Administrative, Business, Business Formation, Liability, Texas, Texas Business
Tagged #advantages, #businesslaw, #drawbacks, #firststeps, #HarrisCounty, #HoustonAttorney, #knowledgeispower, #MurrayLobb, #murraylobbattorneys, #soleproprietor, #Texas, Houston, law

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