Sole Proprietorship vs LLC

July 20, 2025
Published by Gonzales Group CPA

There’s so much more to launching a business than just the business itself. There are legalities, taxes, payroll and more. It’s important to register your small business, typically as either a sole proprietorship or a limited liability company (LLC), to be clear on how your business is going to run and be held accountable. If you’re looking for guidance, here are some basic breakdowns of both options, but feel free to contact the Gonzales Group, a San Antonio TX CPA group, who can help you make the best decision for your small business.

A sole proprietorship is the simplest and most affordable business structure as it is an unincorporated business, owned and operated by one individual. It’s easy to set up, with minimal paperwork and no formal registration required in most states. As a result, it’s a popular option for the early stages of a business idea, small-scale business, and freelancers. You and your business are legally the same entity, meaning you report business income on your personal tax return and avoid double taxation. However, there is the risk of unlimited personal liability. You are liable for any legal or debt issues and your personal assets – including your home or savings – could be at risk.

An LLC, on the other hand, offers liability protection. It legally separates you from your business, which means your personal assets are typically shielded from lawsuits or business debts. However, forming an LLC involves more paperwork, such as filing articles of organization with your state and paying filing fees. It also requires maintaining certain formalities, like a separate business bank account and operating agreement. However, the peace of mind and legal protection often make it worthwhile.

In terms of taxes, LLCs are flexible. By default, they’re taxed similarly to sole proprietorships, but they can also elect to be taxed as an S corporation or C corporation, which can offer tax advantages in some cases.

If you’re starting a low-risk business and want to keep things simple and inexpensive, a sole proprietorship might be sufficient. But if you’re investing significant resources, hiring employees, or want to protect your personal assets, an LLC is often the safer bet.

Ultimately, the best choice depends on your business type, financial situation, and long-term vision. Consulting with a San Antonio TX CPA group, like the Gonzales Group, can help you make an informed decision, setting you and your business up with a solid foundation.

Categorised in: Business Tips, Finance Info, Sole Proprietorship vs LLC, Uncategorized

This post was written by Gonzales Group CPA