Per the Internal Revenue Service’s website, “A sole proprietor is someone who owns an unincorporated business by himself or herself. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation.” As the owner of the business, you are required to pay personal income tax on profits generated through your company.
Some might choose to start their business through a sole proprietorship formation because this is the easiest way to get started. You need to keep in mind though that unlike corporations and LLCs, a sole proprietorship is not a separate legal entity. The profit generated by the business is also considered yours. That being said, as the owner, or sole proprietor, you are exposed to liabilities. Your company’s debt is considered yours. If sued for any reason, your personal assets are also at risk.
Therefore, business insurance coverage is very necessary for your sole proprietor business. Since you guarantee your business with your own assets, such coverage provides you with a safety net against liabilities and risks. The following is a list of insurance policies that you may want to consider:
- Errors and Omissions Insurance – Click HERE to learn about what can an error and omission insurance policy do for you.
- Professional Liability – Click HERE to learn about who needs professional liability insurance.
- Business Owners’ Policy – a package of insurance coverages in a single policy that meets the insurance needs of many small business owners. Click HERE to read more.