What is the difference between a limited liability company and a sole proprietorship?

A Limited Liability Company (LLC) and a Sole Proprietorship are two different types of business structures available for entrepreneurs in New Mexico. A Sole Proprietorship is an unincorporated business owned and operated by one individual. It is the simplest form of business entity and usually requires less paperwork and fewer costs when setting up. The benefits of this structure are that one person has complete authority over the business, and the profits and losses are theirs alone. The downside is that the owner is personally liable for any debts the business incurs, so they may be responsible for any debts or legal action against their own assets. A Limited Liability Company (LLC) is a type of business entity that combines the limited liability benefits of a corporation with the flexibility of a partnership or sole proprietorship. This structure offers the owner limited liability protection, meaning that the owner is not personally liable for any debts or legal action against the business. The LLC also allows for multiple owners, or “members”, and allows for the profits and losses of the business to be distributed among those members. Additionally, in New Mexico, LLCs have less filing requirements than corporations and are less expensive when first setting up. Overall, the main difference between a limited liability company and a sole proprietorship is the amount of personal liability protection each offers. With a sole proprietorship, the owner is personally liable for any debts or legal action against the business. Whereas, an LLC provides limited liability protection, meaning the owner is not responsible for any debts or legal action against the business.

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What is the difference between a limited liability company and a sole proprietorship?

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