Sole Proprietorship vs. LLC and Liability Insurance?

[rf1279]

Hi all,
I'm in the process of forming my own small tour guiding business, and I'm unsure about whether to start as a Sole Proprietorship or an LLC. I've read quite a bit about the advantages and disadvantages of both, and was pretty much set on becoming a Sole Proprietor, but now questions about insurance/liability are making me rethink my decision.

I will be running the web/phone portion of the business out of my apartment, but all in-person interactions with clients will take place in New York City stores/businesses/landmarks/public places. Tours will be conducted via foot and public transportation (cab, subway). I will not be driving anyone anywhere and clients will not be in my home at any time. However, I know that I need to be insured (if someone trips on the street, gets hit by a cab, etc. and decides to blame me) but I'm not sure how to go about this. Do I form a Sole Proprietorship and purchase liability insurance? If I form as an LLC, does this cover all potential liabilities, or would I need to purchase separate insurance as well? All of this has me incredibly confused, and I could really use some help!

Some additional information:
-I am forming this company by myself, with no partners or employees. However, I would like the option to hire a part-time employee or two if/when my business takes off.

-I have a name in mind but have not yet filed a DBA. From what I've read, I only need the DBA as a Sole Proprietorship and not as an LLC?

-I am hoping to have the business fully up and running in the next 1-2 months.

-I would like to spend as little on startup costs as possible. I know the basic costs associated with starting a Sole Proprietorship (including the necessary licenses, it will be under $300), but the specifics on an LLC are harder to find. It sounds like there are attorney fees and newspaper advertising and other things involved, which sound like they could get expensive, and could potentially mean that LLC isn't even an option for me at this point in time. However, if I'm going to spend a lot on liability insurance for a Sole Proprietorship, then maybe an LLC is the way to go?

Any advice/input would be greatly appreciated. Thank you!

[PennyBartlow]

You will want business liability insurance with either business formation. The advantage of an LLC is only the business is liable and not you personally. With a S.P. you can personally be held responsible in addition to your business.

Setting up a single member LLC is not very expensive, but it will be more than the S.P. I own a single member LLC and a multiple member LLC - the single member was much easier and less expensive to set up. It was a few years back, but I think the total legal fee including advertising was less than $1,000. You will want to check your state for LLC annual renewal fees as well.

Penny Bartlow
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