"I refuse to do business with anyone who is not part of a real LLC or corporation", is a phrase I hear a lot. That idea is only reasonable sometimes.
Sole proprietorships are owned by one person (or sometimes a married couple), and are not corporations. The expenses saved, compared with forming and operating a LLC or a corporation, are huge. Sole proprietorships are ideal for small businesses without employees, or internet-based businesses.
When one is buying life insurance, electrical utilities, paying for major appliances, or your kid's school; you would want a big company with abundant resources, and not small sole proprietorship companies.
If you buy items from a small store, EBay, or any service from a web site or company that does not take any of your money upfront; the company or lack of a company, does not actually matter. In situations like these, there is no more risk in doing business with sole proprietorships, than there would be with a corporate entity.
The power of a corporate entity, is if they are large, they could carry on when a valuable person gets sick, dies, or quits.
Corporate power is the number of their people times the quality of its workers, times its financial assets.
The reverse is true also, if a company is short of of money and skilled people; competence and service tends to suffer.
When a LLC or corporation has just 1 or 2 people owning, managing, or working in it, it is actually no stronger than a sole proprietorship.
Most people believe that doing business with corporations or LLCs is safer. However, if you get ripped off and have to sue someone, its often much easier to collect a money judgment from an average individual, than from a typical company.
Different than people, a company may fold or change names overnight.
There are a huge range of shenanigans available to clever company debtors, including moving assets to other corporate entities (occasionally with a deceptive or concealed ownership of that other entity), or having buddies that create insider liens on the company, etc.
Just like people, corporations can have problems. Certain corporations keep running after they are suspended or dissolved. Be careful when doing business with a dissolved, suspended, or bankrupted business.
Corporate entities may apply for bankruptcy protection nearly as easily as people could. A corporate judgment debtor could have many more creditors than a sole proprietorship does, as fewer entities format or loan large amounts of money to sole proprietors.
To summarize, don't reject a business only because of its corporate status, or lack of it. Many skilled and valuable businesses are run as a sole proprietor. Many sole proprietors last much longer than big companies do. Corporate entity or not, stay careful if you pay upfront for anything.
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Mark Shapiro, a expert on judgments. We pay for leads, and have the best quality free leads for enforcers, collection agencies, and contingency collection lawyers.
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