Legal and Tax Issues: January 2007 Archives

Every business is obligated to operate within the law, regardless whether it's located in a home office or the executive suite at Trump Towers.

Home business legal structure

One of the initial steps to take when setting up a home-based business is determining the type of business entity (legal structure) to operate under.

Generally, there are three methods of operation: sole proprietorship, partnership or limited liability company (corporation). The most common method used by home-based businesses is sole proprietorship, primarily because it's the simplest and cheapest way to go.

However, as a home-based business owner, you may be subject to a wide array of liability issues, so be sure to get expert advice suited to your type of business. For example, if your business involves considerable financial risk or the potential to be sued, you may want more legal protection than that afforded by a sole proprietorship.

Home business registration

Registering a small business is not a legal requirement if the business is being operated as a sole proprietorship. However, you may want to register your business anyways because doing so is a relatively inexpensive method of providing some copyright protection for the business name. As the business grows, you may decided to change its entity and having the business’s name already registered will be one less step you have to take at that time.