Most small businesses are legally organized as sole proprietorships. Since sole proprietorships are easy to start and have no ongoing state registration fees, they can be a simple and effective choice when times are good and the bottom line is painted in black. But in these volatile economic times when it is likely that your business is under profits pressure, you will be wise to consider forming a legal entity that protects your house and other personal assets from business debts. Because it also preserves the tax simplicity of a sole proprietorship, Nolo recommends that most small businesses that don't plan to raise capital via a stock offering consider switching to an LLC. Once this is done, you simply notify all creditors of your new legal status and insist that they respect it. But remember, neither an LLC or a Corporation will protect you from debts you personally guarantee, so it will continue to be important to keep your business and personal finances as separate as you can. If you're ready to start your LLC right now, click here.

Sincerely,
Ralph Warner, co-founder