The first structure of your home-based business that you can consider is a Sole Proprietorship. This structure for your home based business is the simplest and most inexpensive way to structure your home based business. Since you have complete control over all decisions and operations, this way to structure your home based business gives you all income of the business to use as you see fit. Many of the profits from this structure of your home based business go directly toward your tax return, and the business is fairly easy to dissolve if necessary.
The downfall of a sole proprietorship is that you will be legally responsible for all debts of the business, so your business and personal assets are at risk when the structure of your home based business is a sole proprietorship. It is also more difficult to raise capital on your own, which you will have to do with this structure of your hone based business. Plus, with this structure of your home based business, employee benefits are not directly deductible from business income.
The second structure of your home based business to consider is a Partnership. In this structure of your home based business, you and at least one other person share ownership of the business. In this structure of your home based business, partnerships are easily established, but you need to make sure you have a Partnership Agreement drawn up. Also, by having more than one owner in this structure of your home based business, you can raise more capital. Some difficulties with this structure of your home based business is making sure you have a partnership with a person with complementary skills and a willing to compromise. Also, in this structure of your home based business, profits have to be shared and partners are liable for the actions of the other partners.
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