Two common questions of a new business owner are:
- Do I need to incorporate or form a business entity?
- Does a sole proprietorship work better if my business consists of only me?
A business entity protects your personal assets from creditors and other legal claims against your business. Without the protection of a business entity, it is possible your personal assets could be used to satisfy a legal judgment related to your business activities. With a business entity in place, the entity serves to shield your personal assets from such claims.
A sole proprietor, defined generally as any business conducted by a single individual and operating without a business entity structure, does not receive the same type of liability protection for their personal assets.
For this reason alone, it is generally advisable to form a business entity to operate any business venture.