Why would you want a separate LLC or corporation for your business?

One of the main drawbacks of a sole proprietorship (working under your own name) is unlimited liability. In essence, there is no difference between your personal finances and the business’s finances. If anything happens to your business and it falls into debt, you may be held personally liable and they can come after your assets. LLCs and corporations have limited liability, which means (under most circumstances) if the business goes under, the people who own and manage the business aren't personally responsible for that debt.

Sole Proprietorship: This is the simplest form of business entity. With a sole proprietorship, one person is responsible for all of the company's profits and debts.

Partnership: A partnership allows the partners to share profits and losses, and make decisions together within the business structure. Remember that you will be held liable for the decisions made, as well as those actions made by your business partner.

Limited Liability Company (LLC): Limited liability companies were created to provide business owners with the liability protection that corporations enjoy while allowing earnings and losses to pass through to the owners as income on their personal tax returns

Corporations: The law regards a corporation as an entity separate from its owners. It has its own legal rights, independent of its owners – it can sue, be sued, own and sell property, and sell the rights of ownership in the form of stocks.

S-Corporations*: A Small Business Corporation, or “S-Corporation,” is a tax classification for LLCs and Corporations. It provides limited liability to the owners/shareholders and it enjoys flow-through tax treatment similar to, but not identical to, partnerships and LLCs. S-Corporations offer some small tax advantages in the employment realm including that owners pay slightly fewer self-employment taxes and owners can be W-2 employees who (in contrast to owners of LLCs) do not have to file quarterly estimated taxes.