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Attorney Nina Kaufman on when entrepreneurs should steer clear of this business entity.
There are numerous reasons why an entrepreneur should consider running a business as a sole proprietor -- meaning it is owned and operated by one person without legal distinction between the owner and the business. But business attorney Nina Kaufman says there are at least three reasons to go with a different business structure:
1. You eventually want to seek investors or partners. This might be the most obvious reason. As a sole proprietor, you're legally on your own.
2. If you're doing "risky business." Say, for instance, you're manufacturing a complicated product that might not deliver on time. If something goes wrong, the business owner can be sued without legal protection from a business entity.
3. You want to do business with major corporations. This is a hurdle for the simple reason that larger companies tend to do less business with sole proprietors than with other businesses with more legal protection, Kaufman says.
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