If you want to have a certain level of protection when running your business, then you’ll need to look into establishing an LLC or Limited Liability Company. Unlike a sole proprietorship, which allows the comingling of personal and business finances and affairs of the entrepreneur, the LLC makes the business a completely separate entity from the individual.

An LLC is particularly attractive because of the amount of protection it gives the entrepreneurs. If you’re running a sole proprietorship for instance, any debt that you incur will be under your name. Therefore, creditors can come after your personal properties (your house, car, etc) in the event that you default.

The same goes for any lawsuits filed. If you’re running a sole proprietorship and you get sued, you're putting your personal assets on the line.

These things do not happen to LLCs. Since they operate under a separate entity, any debts or lawsuits will only be attributed to the business, and not to the individual.

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