Choosing the Right Business Entity—The Decision That Could Make or Break Your Business
When Kevin first started his handcrafted furniture business in California, he wasn’t thinking about liability, taxes, or business structures. He had a passion for woodworking, a small garage workshop, and a growing list of customers who loved his work. To him, “legal stuff” felt unnecessary.
At first, things were great—until one of his handcrafted tables collapsed under a customer’s dinner party, resulting in a lawsuit. Since Kevin was operating as a sole proprietor, his business and personal assets were legally the same. His home, personal savings, and even his truck were at risk. One lawsuit threatened everything he had built.
By contrast, Kevin’s friend, Maria, had taken a different approach when she launched her catering company. She consulted an attorney and structured her business as an LLC. When one of her clients filed a claim after experiencing an allergic reaction, her personal assets were protected. The LLC shielded her home and finances, ensuring only the business was liable. The difference between Kevin’s and Maria’s outcomes came down to one thing: choosing the right business entity.
Business owners have several choices when it comes to structuring their companies, and each decision comes with unique risks and advantages. A sole proprietorship is the easiest way to start, but it offers zero legal protection. An LLC offers a balance of protection and flexibility, while a corporation can provide long-term growth benefits. Partnerships, on the other hand, can be risky without a legally binding partnership agreement.
If Kevin had set up an LLC from the start, he wouldn’t be risking his entire future over one accident. Maria’s preparation saved her from that fate. Before you launch or grow your business, ensure you’re legally protected. Contact Golden Oaks Law Group for a free consultation today.