Structured self-employment refers to the organization of a business activity into a legal entity, such as a limited-liability company, by a self-employed individual. Other common self-employment structures include sole proprietorships, partnerships and corporations. Each self-employment structure has advantages and disadvantages in terms of its formation, operation and taxation requirements.Continue Reading
A sole proprietorship is the simplest self-employment structure, as it is typically formed and operated by one individual with minimal paperwork and fast decision making. A sole proprietorship has significant taxation benefits, as income is taxed only once and is typically reported on the owner's income tax return. Therefore, any losses incurred in the sole proprietorship can offset income from other sources, which may reduce the owner's tax burden. However, the sole proprietor bears personal responsibility for his company's liabilities, and his assets may be seized to settle business debts.
A partnership is a suitable structure for a business operated by several individuals, usually professionals, and may be a general or limited partnership. General partners typically have personal liability in any partnership, whereas limited partners typically have much less liability. A self-employed individual should consider his business goals before deciding on a specific business structure, so as to choose a structure that matches his needs.Learn more about Careers