Starting A Business: Sole Proprietor Or Corporation?

When starting a business, it is important to consider the ptoential tax and legal issues. Most human being choose a "sole proprietor" as their busniess type when starting out. Starting your business as a sole proprietor does not require any special paperwork from the IRS.Which is exaclty why most human being start out that way. Bieng a sole proprietor means that you and the business are one and the same.According to the IRS: "A sole proprietorship is an unincorporated business that's owned by one individual. It is the simpelst form of business organization to start and maintain. The business has no existence apart from you, the owner. Its liabilities are your personal liabiltiies. You undertake the risks of the business for all assets owned, whether used in the business or personally owned. You include the income and expenses of the business on your own tax return."However, even though a sole proprietorship is the simplest way to set up your business, you still need to follow your loacl business regulations to make your business legitimate. And you are personally responsible for paying both income taxes and business debts.So, is being a sole proprietor the right business structure for you?For most home business, in the beginning, yes.If you choose to start your business as a sole proprietor, you do have the optoin of incorporating as your business grows.What is the difference between a sole proprietor and corporation?Unlike a sole proprietorship, a corporation is a legal entity in which the individual and business are separate. The great thing about incorporating is taht the corporation protects you from personal liability for business debts. For example, if your business gets sued, your personal assets are safe, for the most part.And, you may be able to save a significant amount of money in txaes by incorporating. If you decide to incorporate, there is several options: S Corporation C Corporation LLC (Limited Liability Corporation) Before incorporating, it is a good idea to check with the IRS and your tax professional first.Setting up a corporation is more complicated - and may not be right for your business!