Someone emailed this question to me: “Do I need to start my business as an LLC, sole. or Corporation to limit my business from getting the negative creditability from me?
One of the primary reasons to organize a company as a corporation or LLC (Limited Liability Company) is to provide protection against personal liability when something goes awry in your business – not the other way around. Whether your company is a corporation or LLC, under the law it is considered a separate legal entity — technically separate and apart from you personally.
You also mentioned “sole” in your question so I’m assuming you mean a sole proprietorship. A sole proprietorship is not a formal type of business organization. Quite simply, it’s a way to describe an individual who is in business for himself and isn’t receiving W-2 income. Unlike a formal business structure, a sole proprietorship does not provide protection from personal liability.
You noted you don’t want your business to have the negative credibility you have personally. There are two ways to interpret your concern so I’ll briefly address both.
First, when you start a business, regardless of whether or not you choose a formal legal structure, it is always going to be measured by you. Unless you purchase a franchise with a well-recognized brand name, your customers are going to do business with your company because of you.
Secondly, if you’re referring to your personal credit history, once again you aren’t going to be able to escape scrutiny by creating a corporation or LLC. A new business doesn’t have any credit history; therefore, banks and vendors look at your financials to determine the creditworthiness of your business. Even more established businesses often have to disclose the personal financials of their owners.
Think about this. “Most of the shadows of this life are caused by our standing in our own sunshine.” (Ralph Waldo Emerson). You may be focusing on the negative in your life as a rationale for not pursuing the positive. Whatever you decide to do with your business, I wish you much success. If you have more questions please feel free to comment or visit my web site.