Selecting the proper form of organization for your business is a critical decision. There are a number of important considerations when choosing the form of organization for your business. Each form of business organization offers distinct features, as well as some limitations.

You can form a Sole Proprietorship by merely announcing that you are engaging in activities that are in pursuit of profit. This announcement entitles you to deduct business expenses from that time forward. In a Sole Proprietorship there is only one owner, so if you have more than one owner, you need to consider a Partnership, Limited Liability Company (LLC), or a Corporate form of organization.

Sole proprietors pay tax on business profit at their own personal tax rate, which can be as high as 28% to 35%. If you want to keep your business' profits in the business, you may want to consider a "C" Corporation (or an LLC taxed as a "C" Corporation)– with a starting tax rate of 15%.

Additionally, Sole Proprietors are liable for self-employment tax at a rate of 15.3% times any profits of the business. You may want to consider an "S" Corporation (or an LLC taxed as an "S" Corporation) to avoid paying self-employment tax on business profits.

A Sole Proprietor has unlimited personal liability exposure. This means that they are potentially personally liable for any and all debts of, and judgments against, their business. A Limited Liability Company (LLC) or a Corporation both shelter owners form personal liability exposure.

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