So I run a tiny catering thing out of my kitchen and finally talked to an accountant because I want to hire my first part-timer. She started asking about my structure and I was like... I just sell tacos? Turns out it affects taxes, liability, even how I can pay myself. Now I'm down a rabbit hole reading about LLCs vs sole prop and my brain hurts. Anyone else get blindsided by this?
Business Structure
I didn't realize business structure could affect so many things
Yeah the paying yourself part is the sneaky one. Sole prop = you and the business are the same wallet basically. LLC at least keeps things a bit more separated and makes bookkeeping less of a nightmare.
Honestly the liability thing is what scared me straight. I had a friend who got sued over a slip at a farmers market stall. Not fun.
Structure affects so many random things too — like whether you can open a business bank account easily, getting a credit card, sometimes even how suppliers treat you. It's not just taxes.
sole prop is fine until it isn't. that's my hot take. if you're already hiring someone, maybe don't stay a sole prop forever
Wait until you find out about self-employment tax. I literally cried the first year I did my own books.
I switched from sole prop to LLC last year and honestly the biggest change was just my own peace of mind. The taxes were about the same for me since I'm small, but I sleep better knowing my house isn't tangled up in taco money.
SoggyBottomPie the self employment tax is brutal. nobody warns you.
Also don't forget some structures need annual filings and fees. That was a fun surprise in year two. Anyway good luck, an hour with an accountant is way cheaper than fixing a mesx later.