Sole proprietorship (sole props) are businesses that just one person runs without any business entity of a formal nature. This is a common way gor passions and hobbies to start out. Not everyone with business ventures will create a corporation of LLC immediately.
Many times, the company connects to the hobbies of the owner. However, sole proprietorships are not always in the best interest of your company. Becoming companies come with many advantages. There are tax benefits with incorporation, plus benefits for privacy and asset protection.
Why would an owner choose to remain a sole prop? Why does forming a Colorado LLC make more sense?
Reasons to Create an LLC
With those benefits, some may wonder why you would want to incorporate a small business.
One major advantage is that the company records will become more organized. As an LLC you will probably hire someone else to handle records, both financial and business. You and your employees all have packages that are recorded. This result in monitored taxes that get paid promptly. Your business will also have all the required forms, including expenses records. Essentially, everything regarding the business is on record with an LLC
To extend that, you will likely use a CPA to file your tax forms as a business. This improves your accountability and monitoring. You no longer have to worry about maintaining the records yourself. That let you focus on the important task. That lets you focus on the important tasks. As a bonus, this will boost your productivity and help the company thrive.
You will also notice legal advantage when incorporating a business. You get protections if legal issues occur. Specially, lawsuits against the company cannot affect personal assets. That would not be true with a sole prop. This is a particularly strong reason to incorporate as it helps protect the business from lawsuits.
To complement all of this, having a business that is incorporated comes with a better reputation. There is simple another level of respect, both from other owners of business and clients, associate with an incorporated business compared with a sole proprietorship. Since your company can claim its Federal Tax Identification Number, it reaches a different level in terms of business.
Creating a Colorado LLC will also deliver benefits when tax season arrives. The latest tax laws led to changing opportunities that are considered pass-throughs. There are now lowered rates and more available deductions. This mean that what you pay for incorporation will be returned when you file your taxes.
Best of all, it is actually very affordable to incorporate your business. Doing so will not take long or much capital and will deliver a range of advantages. Depending your situation, you may get even more benefits with anonymous LLCs.
Find out more about forming a Colorado LLC,
registered a Colorado business and our registered agent services.