Starting an Online Business All-in-One For Dummies®, 3rd Edition

Strategizing for the Best Organization

Choosing how to set up your business is easier than you might think. Considering that you have only four primary choices, the odds of narrowing the selection quickly are in your favor. Yet one of the most frequently asked questions when someone is starting a business is “Which structure is best for me?” To get started, you need to resolve four key issues:

• Ownership: Deciding who ultimately owns or controls your company is a primary influence on your choice of legal structure. A second factor is the number of people who control the business. Some forms of business are limited by both the number of owners and the type of owner (individual or corporation) it can have.
• Liability: You must choose where you want the legal responsibility for the business to reside. Deciding whether you're comfortable accepting full liability for the actions of the company or whether you need the protection (or veil) of a corporation is an important choice.
• Taxes: Each of the business structures is subject to various forms of taxation. For instance, you might pay a self-employment tax based on your earnings. Or, you could be taxed on the dividends paid out to all owners from the business. In the case of one type of incorporation, you might even experience double taxation — paying tax as the business and again as an individual stockholder.

  Because the tax issues are ...