Legal Question in Business Law in California

Re: LLC or Sole Prop?

The answer to your question depends upon the income you generate. If the business generates a small income, then your accountant friend is right, a sole prop is probably best. There is less paperwork, less state involvement, and a lower standard of review for an audit. However, if your services generates a modest income the LLC will provde a limit to your liability. Even with insurance all your assets are subject to loss with a sole prop, whereas an LLC limits your liability. This is the primary advantage of a LLC. The disadvantage is the state is more striengent with a LLC, for example with home business tax deductions, etc.

So the answer is in your bottom line. It all depends upon how much money your business earns and the tax stance you intend to present to the state and federal governments.