Should My Preschool Be An LLC Or A Sole Proprietor?

If you are sued you don’t want to lose everything, so find out if your preschool should be an LLC or a sole proprietor. This post will tell you what they both mean and help you discover how to protect your preschool.

What’s The Difference Between A Preschool LLC Or Sole Proprietorship?

Both Limited Liability Company (LLC) and Sole Proprietorship are legal terms for how a business operates from a legal standpoint. One of them, though, provides legal protection, and the other does not.

With a Sole Proprietorship you basically don’t need to do anything but start doing business. There is no paperwork to file to do business as a sole proprietor. An LLC requires an application and a fee. However, an LLC also provides a layer of legal protection.

As an LLC, if someone were to sue your preschool for some reason, your personal belongings could not be touched by that lawsuit. Your house, car, and bank account would be protected, but your business would be fair game. As a sole proprietor, though, there is no separation between your business assets and your personal assets. For this reason, you are strongly advised to register your business as an LLC.

How To Apply For An LLC

To apply for an LLC, Google “LLC Secretary of State [your state name].” On the website you will find instructions and an application to fill out with your personal information and information about your business. After submitting the form, you will pay a fee, usually $100 or less. Then you will wait for your registration to be approved.

When You Need To File Articles of Organization For Your LLC

An LLC can have just one member, yourself, or it can have two or more members. If you are forming an LLC with your spouse or with one or more business partners, you should also file Articles of Organization. This document will allow you to state how the rights and responsibilities of the business are going to be divided (50/50, 60/40, 70/30, etc.) There is an additional fee to file the Articles of Organization.

Will You Need A DBA?

DBA stands for Doing Business As. It is a way to distinguish a business that is doing business under a name other than its legally registered name. If you are operating as a sole proprietorship you and your business are legally considered one and the same. But if you don’t want to do business under your own name, then you must register a DBA. For example, if your name is Jane Doe, but you want your preschool to do business as The Best Preschool, then you would need to register a DBA with your state as The Best Preschool.

Likewise, as an LLC, if you want to do business under a different name than your legally registered business name, you will need to register a DBA. For example, if your LLC is registered as The Best Preschool Ever, LLC, but you want to do business as The Best Preschool then you would need to file a DBA for The Best Preschool.

Also, with the above example, your legal business name would be The Best Preschool Ever, LLC. If you wanted to do business as The Best Preschool Ever without adding the LLC every time, you would need to file a DBA as simply The Best Preschool Ever (without the LLC.)

What Will You Need To Open A Business Bank Account For Your Preschool Business?

The order that you would need to file for all of these business entities is:

• LLC/Sole Proprietorship
• DBA
• EIN (Employer’s Identification Number, used with the IRS for tax purposes. Optional, but otherwise you would use your personal social security number on all tax related documents.)

After all of these are filed (or decided against), then, you can open a business checking account.

So now the question is should your preschool be an LLC or a sole proprietorship? Which one will you decide on?