But you must walk the walk and talk the talk. The flea market vendor operating out of his own pocket cannot claim it was a separate business that sold the exploding cappuccino maker.

Incorporation. The business needs to be formally established, structured and registered with the state.
Filings. The business needs to file tax returns and other documentation, separate from your personal returns.
Bank accounts. The business needs ones separate from your personal accounts.
Line of credit. It's awkward lending your own money to the business whenever it's needed. You want the business to have the ability to borrow when needed for short periods.
Credit card. You will have business related expenses. These should also be arm's length.
Expenses. There will be times when you spend personal money on business expenses. Using your personal car when driving to the airport is an example. You need to document reimbursable expenses.
Telephone. If you are your business are two separate entities, you need a phone number for the business entity too.

It's important to understand these structures if you are setting up your own business. It's also important to understand why your small business clients choose the structures they do. In all cases, if you are going to be in business, you need a good accountant.

Instant Insights /

Why businesses choose different structures

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