About once a month I get asked by someone, “what type of business should I be?”
Most of us default to a sole proprietor (self employed), which covers everything from freelance work, to selling Doterra essentials oils, to having a small firm like my own…. Then sometimes we wonder, “Should I be taking this to the next level?” Maybe yes, maybe no.
I’ve put together this handy chart of different business types to show you what’s the what. I’ve also highlighted in red the thoughts that are key to pay attention to, which often get glossed over, such as:
* As a sole proprietor, GET AN EIN. An employer identification number, which is like a social security number for your business, side job, gig, etc. Otherwise, your social security number will be passing so many manual and digital portals and is just asking to be stolen.
* LLC’s formations will not always protect your personal assets
* S-Corps are awesome! And have an extremely low audit rate.
* Already have an LLC, but feeling a little S-Corp envy? There’s a cool form that can be filed with the IRS asking that your LLC be treated as an S-Corp. This is the sweet spot for achieving the tax benefits of both worlds.
* Regardless of your entity type, carry professional insurance for your industry! This will cover a LOT of the liabilities you are worried about.
What Type Of Business Should I Be?
