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An LLC exists separately from its ownersknown as members. However, members are not personally responsible for business debts and liabilities. Instead, the LLC is responsible. A sole proprietorship is an unincorporated business owned and run by one person.
Disadvantages of sole trading include that: you have unlimited liability for debts as theres no legal distinction between private and business assets. your capacity to raise capital is limited. all the responsibility for making day-to-day business decisions is yours.
Almost all businesses in Minnesota must register with the Office of the Minnesota Secretary of State. Before registering your business you will need to decide on the structure of your business (such as Corporation, LLC, Sole Proprietorship, etc).
A sole proprietor without employees and who doesnt file any excise or pension plan tax returns doesnt need an EIN (but can get one). In this instance, the sole proprietor uses his or her social security number (instead of an EIN) as the taxpayer identification number.
LLCs do not pay more taxes than Sole Proprietorships. Both an LLC and a Sole Proprietorship qualify for pass-through taxation. Pass through taxation basically means that any profits and losses from the LLC or Sole Proprietorship are passed through to the business owner and taxed as personal income.
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Advantages of sole trading include that: youre the boss. you keep all the profits. start-up costs are low. you have maximum privacy. establishing and operating your business is simple. its easy to change your legal structure later if circumstances change you can easily wind up your business.
Overall, LLCs have more protection in terms of personal liability than sole proprietorshipsone of the major benefits of this business type. In an LLC, the owner is only personally liable up to the amount of money theyve invested in the LLC.
There are a few reasons to open up an LLC instead of operating as a sole proprietorship: You want to expand the company to more than one owner in the future, which is easy with an LLC. You want to protect your personal assets from potential financial and legal liability.

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