Sole Proprietorship vs Corporation

Sole Proprietorship vs Corporation

Is an S corp the same as a Sole Proprietorship?
No. An S Corp is a Corporation. A Sole Proprietorship is not a Corporation.

By setting up a small business as a corporation from the beginning, the full time in business will be reflected with the secretary of state and with main business credit agencies.   Both Dun & Bradstreet and Experian business credit are major credit reporting agencies.    These reportings will later help the small business owner in their efforts to obtain a small business loan.

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What is the difference between a Sole Proprietorship and a Corporation

A Sole Proprietorship is one indidual operating a business and are the sole owner
of that business. They are not a Corporation and do not receive the protections and other benefits that being structured as a Corporation provide.
A Corporation is a type of company structure that is more commonly used for larger companies. This type of company structure affords certain important legal protections to the owners of the Corporation. The Corporate business structure provides a strong barrier against owners being sued individually for damages.

A sole proprietorship is not listed with the secretary of state with most states.   Some states offer listing sole proprietorships under fictitious name certificate sections.     However, this is not the case with all states and even in the states which do list fictitious names, the section for finding these names is often not as prominent as the sections for corporations.    The result is when you are doing something important with your small business, such as obtaining a small business loan, setting up trade accounts, people will be looking for you.

When someone is looking for your business listing, you want them to find you. 

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Small business company structure

The type of company structure a business chooses is important when the company needs a small business loan.   Many business owners start with a sole proprietorship, incorporating later.   Retain all business licenses, business checking account statements and tax return information since the inception of the business to prove time in business, which will be important for the business over time.

Incorporating immediately is typically a better choice because the business will be listed prominently on the secretary of state records.    By incorporating immediately, any other entity your company deals with will have an easy, fast way to see your full time in business with the state records.   Time in business is one of the key factors when business credit is evaluated.

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The main issue often cited by business owners when it comes to which type of business structure to choose is liability.   The officers of the business do not want to have personal liability for any issues related to the company.   If the business gets involved in legal issues, bankruptcy issues, civil or criminal issues involving the operation of the business, the owners want the maximum separation to protect them.

This is best accomplished through either the S-Corp, C-Corp of LLC company structure format.    If the business is small, the S-Corp may be the best choice for businesses with less than 35 Employees.   If the business is a single member,  then the LLC, Limited Liability Corporation may be the best choice when setting up the business structure.   If the owners chooses a Sole Proprietorship or Partnership, they leave themselves open to litigation or debt collection problems.

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Alternative Loans

Alternative Loans for businesses

This article will assist small businesses in learning where to find and secure alternative loans.  A full range of topics will be discussed.   This includes:

The formation of businesses, business credit, loan types and amounts.  Hispanic business loan and other hurdles to minority business loans are considered.   LGBT and gay friendly loan resources are provided.  Also included is how they all affect a business’s ability in obtaining credit.    A number of topics will be detailed and address subjects known by very few business owners nor discussed by credit specialists.    Many of these are critical for businesses to understand in order to secure credit.

Topics include how to apply for a small business loan.   Things not do when applying for a small business loan will be discussed.   Businesses do not need to try to apply for the highest loan possible or use just one loan type to get financing.
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Many business owners request the highest amount possible when applying for a business loan.   This is not the best approach.   If a business requests too much they may be declined simply for asking for too much.   A business may qualify for $100,000.   However, if they apply for $150,000, they may be declined because they do not qualify for $150,000.   If the business only wants $100,000, they should only apply for $100,000.

A business does not need to get all the capital they need from one program and one loan.   A business may be able to get $50,000 on an asset based loan and another $50,000 through a business line of credit.  This tactic will allow the business to obtain all of what they need rather than only getting $50,000 if they had applied for one type of loan.

When forming the business, the business owner should pick the business type they think they will stay with for a few years.   If the begin as a sole proprietor then switch to a Corporation after only 1 year, they should probably start as a Corporation.

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