Anyone can form a sole proprietorship. However, it makes more sense to transition into a limited liability company or corporation at some point. Most businesses that turn a profit benefit from incorporating.
If you have a growing business, continue reading to learn about when you should transition into a new business entity. The initial cost might save you legal fees and taxes in the long run.
Why form an LLC?
LLCs are the simplest way to protect yourself from liability. If you sell a product, you open yourself up to liability. When you operate as a sole proprietorship, you take on all the personal responsibility of running a business. If someone decides to sue you, you risk losing all your assets, including your house, car or savings. LLCs allow you to separate from your company and declare bankruptcy if you have to without losing your home.
Where do I file?
Filing for an LLC is simple. Indiana residents must send filings to the Indiana Secretary of State Business Service Division. LLCs must send biennial reports to the Secretary of State’s office, according to IN.gov.
Should I wait?
Usually, you should file for an LLC as soon as it makes sense. However, since it is close to the end of the year, you might want to wait until January. This simplifies taxes, so you do not have to pay taxes as two separate entities for the year.
Deciding when to form an LLC is not a straightforward answer. You must research and consider if you put your assets at risk by delaying the transition.