The “sole proprietorship” form of business exists when an individual conducts business without the formalities or protections that characterize other forms of business, such as a corporation, limited liability company, etc. Many small businesses begin life as sole proprietorships.
Sole proprietorships often use fictitious business names. Although these businesses may have names that sound as though they are another form of business, they are in fact nothing more than the individual, doing business as (“dba”) the fictitious business name. For example, Mr. Smith may be doing business as “The Smith Company.” However, since Mr. Smith has not formed a corporation or any other formally recognized and registered business entity, to operate his business, in the eyes of the law, Mr. Smith is actually doing business solely as an individual person. The fact that Mr. Smith uses the fictitious business name “The Smith Company” offers him no individual legal protection whatsoever. If Mr. Smith or his business is sued because of his actions or the actions of one of his employees during the course and scope of business, Mr. Smith is almost certainly personally liable for any court decision that may be issued as a result of such actions. All Mr. Smith’s unprotected assets, including his home, bank account, stocks, bonds, mutual funds, car, personal possessions and any asset he owns may ultimately be taken to satisfy any court decision against him.
Legally speaking, Mr. Smith is totally exposed. A single lawsuit can instantly destroy decades of hard work. Mr. Smith would do well to consider another form of business ownership. The corporation, limited liability company, limited partnership and other business structures offer critical protection to the assets of business owners.
Porter Law Group helps small and growing businesses gain this critical protection. We will advise you as to the benefits of the various structures and help you determine which may be most advantageous for your business and personal needs. Contact us, today, and we will help you take the next step in the evolution of your business.