incorporating

What is the Best Type of Business Entity for Your Home Based Business?

Solopreneurs of the world, unite! This year, FlexJobs released “The State of the Remote Job Marketplace” report that outlined what the current remote work industry and its workers looks like.

Nearly four million workers, 3.9 million to be exact, in the United States spend half of their time working from home, totaling 2.9 percent of the U.S. workforce.

While many of these workers are employees able to work remotely from their business, others are entrepreneurs that have started up their own company from home.



Today’s entrepreneurs may face challenges in funding their business and properly managing their time, but they are still overwhelmingly enthusiastic about being their own boss.

The State of Small Business survey, in partnership with Guidant Financial and LendingClub, revealed that 75 percent of all business owners rate their happiness level at an 8 or above on a scale of 1 to 10 (10 being the highest, of course).

Whatever business you decide to run from the comfort of your own home, however, should still be legitimized with a legal structure. If you’re not sure which one to incorporate as, here’s a look at a few entities that might be your best bet.



Sole proprietorship

Ideal for: Businesses where there is little to no liability risk. The lowest possible risk you can think of, such as stitching together unique stuffed puppets and selling them through an e-commerce storefront, acting as a consultant or life coach, or maintaining a lifestyle blog.

Why this entity?

A sole proprietorship is one of the most affordable legal structures to incorporate as and is the simplest in terms of paperwork. This is the ideal structure for solopreneurs who want to be their own boss and be in control of every aspect of their business.

However, the one caveat to being a sole proprietor is that the entity doesn’t provide liability protection. This means that there is no separation between personal and professional assets. If something unforeseen should happen to your business, you, the owner, will be held entirely responsible for it.

The good news? If you’re running your business from home or through a website without the need for a physical storefront, there are fewer chances that your small business could land in liability hot water.


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Limited liability company (LLC)

Ideal for: Virtually any kind of business you decide to run from home or plan to (one day) turn into a brick and mortar storefront. Think bookkeeping or tax consulting, landscaping or event planning.

Why this entity?

Aside from tax savings, one of the biggest benefits to incorporating as an LLC is the liability protection that the entity provides its business. Once you have formed an LLC, your professional and personal assets are separated and protected with liability protection. This means that if issues arose for your business — such as lawsuits, loss of personal customer information or damaged products — your personal assets will not be affected.

Regardless of the entity you decide to incorporate as, don’t forget that your business will still need to check in with its designated Secretary of State to determine any business licenses or permits it may need in order to operate within your city, county or state.

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