Question:

Is it possible to do business without having an LLC or corporation set up?

Answer:

Yes! There are different types of unofficial, informal, and unincorporated business vehicles that allow you to do business without setting up an official business entity. These ways are less official (no filing with the state) and are not necessarily governed by the same rules as LLCs and corporations. Sounds appealing right? The unofficial ways include becoming a sole proprietor or forming a partnership.

Sole Proprietor

A sole proprietor means you and you alone as an individual are doing business. There is no business entity and filing with the state is not required. The only thing you might file with the state is for a DBA or fictitious business name.

Partnership

A partnership is when there is more than one person involved. It’s the informal equivalent of doing business as a sole proprietor, but with more than one person. Within partnerships, there are two different kinds: a general partnership and a limited partnership.

In most cases, if you don’t file for an LLC or corporation, you are automatically a general partnership. There typically is an agreement in place which outlines the rights and responsibilities of the partners. In a general partnership, both partners have all the rights and liabilities. Note that you can have a verbal partnership agreement in place, so make sure you know what you are agreeing to because that can come back later and becoming binding.

In a limited partnership, one partner has less liability than the general partner. This is because the general partner does most of the work compared to the limited partner, therefore the distribution of the rights and liability are a little different than a general partnership.

To Wrap Things Up….

There are two ways you can do business unofficially and informally without being set up as an LLC or corporation. A sole proprietor if you are doing business alone, and either a general or limited partnership if you are doing business with other people. These unofficial ways of doing business can be appealing since it’s technically informal and there’s no filing with the state. But it doesn’t necessarily protect your personal assets from liability. Keep in mind that the liability mechanisms will not be as strong and protective as having an LLC or corporation in place because those entities are what gives you official liability protection of your assets when doing business.

As always, feel free to reach out to our team at bertie@inbetterwetrust.com for more questions. We’re happy to answer any other questions you may have!