Business Structures

Many painting contractors operate as a sole proprietorship. I believe that this is an invitation for disaster.

As a sole proprietor your business is inseparable from you—they are one and the same entity. You are personally responsible for everything your business does. This means that if your business gets sued, it is really you that is being sued. Your personal assets are at risk in this situation. In short, a sole proprietorship provides no personal protection.

Partnerships are little different, except that each partner shares the risk. Partnerships also carry the risk of the relationship going sour, and the “divorce” can be messy and expensive.

A corporation or LLC provides personal protection. The corporation stands as a distinct legal entity, separate from you as an individual. This is true even if you are the sole owner of the corporation. If the business is sued, only the business’s assets are at risk.

Corporations can also provide certain tax benefits for the owners. For the individual, income is taxed; for the corporation, only profits are taxed.

You should always consult with an attorney and/ or accountant before making important decisions regarding your business. But operating as a sole proprietorship in these litigious times is a risk nobody should take.

© BEP Enterprises Incorporated 2008