Here are the most frequently asked questions, along with our advice:

Question: How should I structure my new business? 

Answer: The issue of setting up your business is very personal and tailored to your needs and plans. There are several forms of business organizations, and no form is perfect for every person. Here are four common structures:

• Sole proprietorship – This consists of one individual or a married couple and is easy to form because there are few legal formalities. However, it is advisable to consult a CPA or attorney because sole proprietors are personally responsible for debts, and their personal assets can be exposed to liability.
• Limited Liability Company (LLC) – This is created under state law through a written agreement and is separate from its owners. Your personal liability can be limited or restricted to your investment in the company SO LONG AS you keep business records and assets separate from personal records.
• Subchapter S Corporation (S Corp) – This is formed under federal tax laws. The federal government places more restrictions on S Corps than state governments place on LLCs. It is separate from its owners and enjoys pass-through tax status and limited liability, SO LONG AS business records and assets are kept separate from personal records and all corporate requirements are followed.
• Subchapter C Corporation (C Corp) – This is formed under federal laws and has the most governmental restrictions. There are advantages in its ability to attract venture capital. It is separate from its owners and offers limited liability SO LONG AS business records and assets are kept separate from personal records and all corporate requirements are followed. 

You should seek the guidance of a lawyer or CPA in deciding which entity is right for you. 

Question: Should I set up a separate bank account for my business?

Answer: Yes. No matter which structure you select, it is important for legal and financial reasons to separate your business records from your personal ones. 

And, if you are an independent contractor who receives commissions, you should know that income taxes, Medicare, and Social Security are not withheld from income. ICs use 1099—Miscellaneous Income forms to pay taxes. This is different for agency employees who file W-2—Wage and Tax Statement forms. 

Keeping perfect and pristine financial records will make your life much easier. It is important to seek the advice of an attorney or CPA regarding the payment of taxes.