How many of you have wondered what’s the big difference (and big deal) between being a SOLE PROPRIETOR vs a LIMITED LIABILITY COMPANY (LLC)? I mean… we own a business… can’t be that big of a deal, right? WRONG. While these are two of the most popular small business structures, most don’t know the very important legal differences between them.

Let’s get down to the LEGAL basic difference between the two:

SOLE PROPRIETOR: a business owner who has NO LEGAL SEPARATE EXISTENCE from his/her business.

LIMITED LIABILITY COMPANY:  a company that is LEGALLY SEPARATE from its business owner. 

That’s it… just one little word that divides the two when it comes to legalities: SEPARATE. That one word means a whole lot when the proverbial you know what hits the fan. If, God forbid, something terrible happens on a session and your client in turn, needs to sue you to recoup medical fees or what have you, guess what? Depending on your legal structure (sole prop vs LLC), it could have a major effect on not only you, but your family as well.

Let’s make a quick, yet awful, little list of the “what could happens…”

1. snake bite on a session (a very real possibility down here in the south)

2. allergic reaction to makeup (we’re talking of Shrek like magnitude)

3. a client breaks an ankle (first they’re frolicking through a field, next, they’re screaming for their momma on the ground)

4. a client following you is hit by a car (and it’s your fault because they were just trying to keep up)

5. dehydration which leads to fainting which leads to a concussion 

Dooms day, much, Amanda? Yes… but I promise, I’m trying to make a point. NONE of the above cases of the terriblest are controllable. NONE. So, as much as you try to safeguard you and your client during your session, sometimes things are just out of your control.

If you are a sole proprietor right now, you need to know that in the case of a lawsuit, YOU are named as the defendant and YOU are held personally liable and responsible for financial compensation. And guess what? If you cannot pay your judgement the government can seize YOUR ASSETS (personal property) and issue garnishments. YIKES… are you hyperventilating yet?!? I am and I’m not even a sole proprietor. Seriously think about what this could mean for you and your family… your home, vehicles, bank accounts, funds, ALL OF IT could be taken away from you all because of a freak accident that you have no control over. This is NOT the way, people. 

Now let’s talk about what a lawsuit means for a Limited Liability Company. Your business is named as the defendant and your business is held responsible for financial compensation… NOT YOU. This means that you and your personal assets & accounts are PROTECTED. Ahhhhh…. THAT is a HUGE difference! 

It all boils down to RISK.

I’m an adventurous gal, but I’m not about to put myself and my family at risk of having our home taken away. And people…. THAT HAPPENS. And YES, I’m trying to scare you. WHY? Because if that’s what has to happen to save your butt in a lawsuit, then so be it. 

And now I know what you’re thinking. “HOLY CRAP AMANDA! How do I become a freaking LLC RIGHT NOW?!?!” Ok, so if you have a good CPA (and no… TurboTax or H&RBlock ain’t it)  they will help you and refer you to an attorney who can get you set up as an LLC. If you don’t have a good CPA, call around to your local attorneys and ask if they specialize in small business and can help you become an LLC. Or, ask your local Facebook Photographers group who they all used to become an LLC. You can expect to pay a fee (sometimes around $1,000) but I’d rather have you pay that than have your home taken away… that is straight up horrifying.