Legal
Choosing a structure for a very small business
The choice affects liability, tax and paperwork. For most people starting out, the practical difference is narrower than the advice suggests.
A sole proprietorship requires no formation step, which is why most small operations begin as one by default. Its drawback is that there is no separation between business and personal liability.
A limited liability company creates that separation if it is maintained properly, which means separate accounts, separate records and not mixing personal and business money. Formation and annual fees vary considerably between states.
Corporations add formality and are generally chosen for specific reasons, such as outside investment or a particular tax treatment. For a one-person service business they usually add cost without a corresponding benefit.
Two things matter more than the structure at the outset: suitable insurance for the work, and written agreements with clients. Both protect against the situations people choose a structure hoping to avoid. Small Business Development Centers advise on this at no charge.
What to do next. Speak to a Small Business Development Center, which advises at no cost, before paying for a formation service.
studentaid.gov outranks this page. Rules, figures and dates change
between academic years. This is written to help you read the official sources, not to
stand in front of them. Start there.
Nothing here is a determination. We cannot tell you what you qualify
for, and no website can. The programme and the office that runs it decide that, after
you apply.
Still have a question?
Describe what you are trying to work out and a member of the team will answer, or direct you to the office that makes the decision.