For many, this choice is a no brainer, but for the overwhelming majority, it isn’t always clear about the benefits of choosing one legal structure over another, or even if you should incorporate at all.
When To Incorporate, and When Not To
Firstly, you need to decide if you need to incorporate. In general, if you’re planning to build a real business, the answer is yes and how.
Some businesses have more flexibility than others. If you’re going to sell a product online, you should probably incorporate from day 1. If you’re building any form of consulting business, however, its not always clear that immediately incorporating is the right choice. If you’re just working for yourself, and don’t have many overhead expenses or any employees, you can go a long way as an individual freelancer.
At the end of the day, however, incorporation is a way to limit your personal liability for actions your company takes, and can be a great way to minimize your tax burden and increase your ability to reinvest and expand.
Choosing the Right Structure
Again, choosing the right incorporation structure is going to depend largely on your type of business. Here are a few quick guidelines.
- Sole Proprietors or Limited Partnerships are the most simple forms of business, and are designed for individuals selling their services (either alone or with a small group of peers), and are looking for some form of organization.
- LLCs are also great for small businesses, because they’re incredibly easy to setup and have very low annual costs, while providing legal protection for their members and employees. LLCs also have the benefit of being able to declare themselves an S Corporation for tax purposes, which can help minimize taxes owed by the company.
- Corporations are the most complicated structure, and generally require the help of a lawyer to setup and manage properly. This structure is appropriate if you’re going to be taking on any form of outside investment, or are trying to grow the business into a large company, rather than a lifestyle business, in the long haul.
If you do decide to incorporate your affiliate website, most online entrepreneurs choose a simple structure, like an LLC to start. The paperwork associated with C Corporations and other options usually makes it less attractive, especially since online home businesses rarely expand to have more than a few owners.