Choosing the Right Business Entity for Your Private Practice

🤝A business entity is a legal categorization of your relationship with your business for tax and liability purposes.

💼A sole proprietorship is the default business entity, while an LLC offers limited liability.

💰Filing as an LLC can offer tax advantages and separate your personal assets from your business assets.

⚖️Being a sole proprietor exposes you to personal liability for your business dealings.

📑LLCs require more paperwork and upkeep to maintain the separation of personal and business assets.

What is the difference between a sole proprietorship and an LLC?

—A sole proprietorship has no extra paperwork or fees, but exposes you to personal liability. An LLC requires an application process, offers limited liability, and has tax advantages.

Why is an LLC the best option for private practice?

—Filing as an LLC separates your personal assets from your business assets, providing protection from personal liability and potential tax advantages.

Can I change my business entity later?

—Yes, you can choose one business entity now and change it later if necessary.

What if I live in California and can't file as an LLC?

—If you live in California, you can consider incorporating to gain some of the benefits of limited liability.

Do I need an employer ID number as an LLC?

—Yes, obtaining an employer ID number is recommended for an LLC to maintain separation between personal and business assets.

00:00A business entity is a legal categorization of your relationship with your business for tax and liability purposes.

02:40Learn about the differences between sole proprietorships and LLCs, and the pros and cons of each.

03:32Sole proprietorships are easy to manage, while LLCs offer limited liability.

05:13Filing as an LLC provides protection of personal assets and potential tax advantages.

06:40Being a sole proprietor exposes you to personal liability for your business dealings.

07:32LLCs require more paperwork and upkeep to maintain the separation of personal and business assets.