Starting a new business is a very exciting experience for sole proprietors who want to get the highest return based on their efforts and managerial skills, as the entire operation grows the need for investors and business partners becomes a priority. A very common mistake sole proprietors do is to reinvest a weak amount of money back into their business, the lack of capital which goes back to the operation is key for the successful growth of the venture.
Yet another mistake sole proprietors do is to get a business with the wrong people, in order to get associated with someone else a sole proprietor needs to work on a partnership, this business entity may prove to be a bit unstable if the appropriate paperwork is not disclosed to all of the partners, it is the case any financial problem get equally divided among the partners, if a sole proprietor faces financial difficulties all of the responsibility goes back to the founder who is liable for any losses that the business might incur.
The best way to protect your assets and run your business at the same time is to form a limited liability company or LLC. -- having established such business entity the owner of the business or the owners of the business are not directly liable for financial difficulties which might be faced while running this venture in other words, the assets of the directors and anyone directly involved with it are not at stake in case something goes wrong which is exactly what happens when a sole proprietor or partnership goes through this situation.
Besides the liability factor, a limited company is a business entity set for growth, this means that by incorporating your business you are able to appeal to investors who will provide the capital needed for your business to grow this being the case, the Board of Directors or business owner doesn't have to withdraw the investment capital directly from their personal account.
The growth potential a business experiences after being incorporated can provide additional resources to hire more employees, more products and pay for additional services which will benefit anyone who is related to the operation of this business entity. When someone forms a limited company the company which is formed has a life of its own -- so to speak -- it's also able of being traded in the stock market which is where most of the investors will come from after having evaluated your business model and the potential for growth.