Small Business Structure: How to Structure Your Creative Small Business

How to structure your creative small business

You’ve seen the zillions of Facebook posts throughout business groups asking what business structure they should start out with. And subsequently, you’ve seen the bagillions of responses from creatives offering their opinions on the subject. While it might be helpful to hear of personal experiences with one business structure over another it can also be fear mongering.

Everyone has a different experience- we talk about that a lot at M&T. Others experiences might not necessarily be YOURS! Just remember that if you’re lurking in groups with thousands of people offering their opinions (on anything!)

Today we’re giving you some hard facts about the two most popular business structures for solopreneurs and creative small businesses to start with!

I know you’ve already said, “There’s only two choices, sole proprietor or a limited liability company”

How to Structure Your Creative Small Business | Business Structure | Moi & Toi

Two Popular Business Structure Options

Sole proprietorship

A business structure that is an extension of you! It operates under your social security number and is not considered a separate business entity (which is beneficial for some!). A sole proprietorship is the most basic business structure and most people start here either knowingly or unknowingly. If you make money doing a service, but did not set up a formal business structure, you fall under a sole proprietorship by default. Sole props are not taxed separate for you because they are not their own entity. There is no legal protection from personal assets.

Limited Liability Company

Usually this is for a partnership, or two or more individuals going into business together, but you can also form an L.L.C. if you are an individual seeking a little more monetary protection. Let’s break down the name of this business structure- Limited Liability, you have limited liability in the company! It is limited to your investment into the company and provides a bit of separation from your personal funds. This business structure is considered the next step up from sole proprietorship (although note- an L.L.C. does not mean you have a fully separate business entity and you’re personal funds are not fully financially protected should anything occur with the L.L.C)

How They Are Different

#1. The money

With a sole proprietorship you are legally able to keep your business funds in with your personal. We 100% DO NOT recommend doing this, but we’re sharing facts here, right? When you have a business account and a personal account (which makes us very happy) you are able to move funds back and forth as you wish- totally legal and sometimes necessary depending on your life situation!

With an L.L.C. you are unable to intermingle your business funds with your personal funds. You must report your business expenses separate from your personal finances. When tax time roles around you may file as a sole prop, partnership, or corporation depending on your needs.

#2. The protection

Neither one of these offers a foolproof financial protection from your personal assets and net worth. An L.L.C. however, does offer protection against your investment into the L.L.C. itself whereas a sole proprietorship does not. An L.L.C. was actually designed for several people going into business together which is why it offers a little bit more protection. You can however establish an L.L.C. without having multiple owners or even employees if you’re wanting that little bit of protection (or if you just want that comma L.L.C. in your business name).

#3. Tax Time

Taxes with either a Sole Proprietorship or an Limited Liability Company are pretty straightforward. You do, however, have some options with filing as an L.L.C. You can choose to file more similarly to a sole proprietorship or a corporation. If you’re an L.L.C. already and don’t know which is best it would be a good idea to speak to your CPA about the benefits of one over the other for your specific situation! If you’re an existing sole proprietorship you’re taxes won’t look much different than your personal taxes, because they are integrated as your business is literally an extension of your social security number. You’ll probably end up with one extra form (a Schedule C), but that’s about it! Turbo Tax has a Self-Employeed version that makes it nice and easy to file!


Experts agree that if you are bringing in $40,000 income or higher that you need to be a corporation! That can be a scary word for a creative small business owner, but remember, you’re a CEO now! (And if 40k sounds like a huge number you’ll never reach- let’s chat).


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