The sole proprietorship remains an extremely popular business entity
Proponents of limited liability companies point to them as offering the flexibility of a partnership with the limited liability protections of a traditional corporation. Bankrate.com observes that some people believe that LLCs are “probably the wave of the future” given that they have already surpassed partnerships and corporations as the business entity of choice in America. Often forgotten in the praise of LLCs are sole proprietorships. Like the late comedian Rodney Dangerfield, sole proprietorships get no respect.
While the LLC may be the new popular kid on the block when it comes to business formation, the humble sole proprietorship has lost little of its former allure as the entity of choice for many first time business owners. Shoeboxed.com observes that over 75 percent of small businesses in the United States operate as sole proprietorships. Forbes magazine adds that some 19.4 million sole proprietorships without employees exist in the United States. These non-employee sole proprietorships had average revenues of $44,000.
Certain businesses are more suitable for a sole proprietorship than others. Shoeboxed.com notes that a sole proprietorship is a great choice for companies not interested in huge growth or in sharing decision making with partners, members or a board of directors. Bankrate.com states that if you are doing consulting work and are truly the sole proprietor of your company, selecting a sole proprietorship entity for your business “is probably best.” The Small Business Administration adds that, in addition to consultants, freelancers and independent contractors often choose to operate as sole proprietors.
The biggest draw of a sole proprietorship is the ease with which it can be set up. In Louisiana, a sole proprietorship can be set up without filing any legal documents with the State of Louisiana. The things that you need to do to set up a sole proprietorship in this state are to choose your business name, register a trade name with the Parish clerk of court and obtain whatever local business licenses or permits that you are going to need. If you are going to have employees, you would also have to obtain an employer ID number.
Inc. Magazine observes that, even with sole proprietorships, there is still plenty to think about in the formation process. For example, you are advised to draft a comprehensive business plan. That plan will serve as a roadmap so that you know the order in which to take the necessary actions to start up and then operate the business. Moreover, a business plan also forces you to focus on specific aspects of your business and how to grow it.
If you are going to choose to transact business under a fictitious name, you need to think about that name and make sure the name is not being used by someone else. Indeed, you may wish to give thought to trademarking the name you select. While this is not mandatory, legal protection for a business name prevents someone else from using it and possibly robbing your brand of its uniqueness or taking advantage of your goodwill. Many small entrepreneurs want to conduct business via the Internet. If you will be conducting business on the Internet, you need to create a website and pick and register a domain name.
Seeking legal advice
If you are starting a new business, you should contact a Louisiana attorney experienced in business formation. An attorney will be glad to sit down with you to discuss your proposed business and offer you advice on the business structure best suited to further your economic goals.