By citizen.com 

When it comes to setting up the legal structure of a new small business, there is no one-size-fits-all solution. As the founder of the business, you will be considering one of three legal forms — sole proprietorship, partnership or corporation — depending on answers to questions such as these.

First, will I be the only owner? If so, you may choose to remain in a sole proprietorship. Easy to form, this structure allows the owner to make all the decisions and receive all the profits. The owner also enjoys relative freedom from most government control and reporting requirements.

Next, how important is it to me to limit personal liability for debts or claims against my business? If it is highly important, you’re most likely to incorporate the business.

Next, which legal form of business organization will result in the least amount of taxes? There is no clear-cut answer here, which is one reason any small business owner should seek professional advice based on the circumstances of the owner and the business.

However, which legal form will be the simplest to set up and maintain? Generally, sole proprietorship is generally the simplest and least regulated. In fact, if your business starts up without a partner, the law will classify your business as a sole proprietorship.

The greatest disadvantage to a sole proprietorship is that your personal assets and those of your family are not protected. Should there be financial problems or a lawsuit, your assets are at risk. Additional insurance will help minimize the risk and cover liability up to a certain dollar amount; however, you also assume greater personal liability.

With more than one owner, the business can form as either a partnership or a corporation. Partnerships come in two varieties: general or limited, both giving all partners a say in the decisions. General partnerships do not require a formal written agreement (although not having one would be a serious mistake), but limited ones do and also require the filing of a certificate. The general partnership stipulates that all partners have unlimited personal liability, but in a limited partnership, partners typically are liable only to the extent of their investment.

The main advantage of incorporation is the limited financial liability of the owner. Personal assets cannot be attached and ownership is transferred through the sale of stock shares. The corporation is a legal entity and will continue to exist until its legal dissolution, even if one of the principals in the business should die.

There are different types of corporate structures. A regular corporation has government control and reporting requirements. Corporate earnings are subject to double taxation profits, and then the shareholders’ earnings through dividends. However, an S corporation provides the limited liability of the regular corporate structure, and earnings are taxed to individual owners at their individual rates. A limited liability company (LLC) offers the benefit of limited liability without being as complex as a corporation.

Finally, the list of choices is pretty clear, but whatever you choose there are advantages and disadvantages depending on specific business purpose. Usually business people consult a tax attorney before deciding on form of business organization. So, you should as well.

“Home based business”. These magic words make business people search on the Internet for new business ideas. True enough, nobody likes to commute every day and to work in the office. What business people need to know about home based business is all about online business, technology changes and if they are doing any business offline how to bring it online. The video I posted today is a brief introduction to the project.

It should be noted if online business is your passion and it generates even some income, IRS will treat you as a regular business. In other words, you still need to pay taxes. 

However, according to “Silicon Molds Blog” there are several tax advantages of doing business online. Personal expenses, such as the use of your car, home or computer may become partially deductible, retirement savings plans can shelter part of your eBay income from taxes, and you may be able to hire your family to help shift income to members in a lower tax bracket. So even if you only earn a little money online, not only are you required to report your earnings, it may even help you reduce your income taxes by taking advantage of tax opportunities available only to small business owners.

Generally, any income you receive from all sources is subject to U.S. income tax unless it is specifically exempt by law (hint: online profits are not exempt by law). That means that a lot of activities that you might not think of as taxable, such as garage sale income, gambling winnings, and online businesses are taxable.

In a nutshell, an approach to the online vs. offline businesses should be comprehensive and tax issues need to be considered very well. Enjoy your weekend!