The most common legal structure for small business is a Sole Proprietorship for entities with only one owner or a General Partnership where there are two or more owners. Both of these legal entities make good horse sense when you are just starting out in a typical home-based business and personal liability is not a big concern.

Sole Proprietorship and General Partnerships are the most popular as they are the least complicated and expensive to establish. Both, however, have the main drawback that the business owners are personally liable for business debts. This is a significant drawback as it both limits your ability to establish separate business credit lines for your home-based business and holds you personally liable for any and all debts including but not limited to judgments from lawsuits.

If you are concerned at all about the potential liabilities your business may incur or think that you will need substantial lines of credit to adequately fund your home-based business, you should give due consideration to forming either a Limited Liability Company (LLC) or a Corporation.

A LLC or Corporation may seem a bit over the top for you if you have what you deem to be a simple work from home business. They are both more complex and costly to form, but they do have substantial advantages.

The main feature that attracts even simple work from home businesses like yours to form LLC’s or Corporations despite the increased complexity and costs associated with them is the limitation of the owners’ personal liability with respect to business debts or lawsuits. Both the LLC and Corporation, if properly established, can also offer more amicable tax treatment.

Generally speaking, the LLC is the logical choice for most small business owners as it tends to provide more flexibility than a Corporation especially when you have more than one owner.

A summary of the entities discussed is included below as a recap:

***Entity: Sole Proprietorship***

Pros: Simple and commercially attractive to form and operate. All profits or losses are reported on your personal tax return.

Cons: Owners are personally liable for business debts and law suits against the business

***Entity: General Partnership***

Pros:
Simple and commercially attractive to form and operate. All profits or losses are reported on the partners’ personal tax returns.

Cons:
Partners are personally liable for business debts and law suits against the business.

***Entity: Limited Liability Company (LLC)***

Pros:
Limits the personal liability of owners with respect to business debts, profits or losses may be allocated differently than the owners’ business interest, and IRS regulations allow a choice to be taxed as either a partnership or corporation.

Cons:
More costly to create than Sole Proprietorships or General Partnerships.

***Entity: C Corporation***

Pros:
Limits the personal liability of owners with respect to business debts, benefits (ie. Health insurance, 401K etc.) are deductible as business expense, and owners may distribute profit across the owners and the corporation resulting in a lower overall tax rate.

Cons:
More costly to create than Sole Proprietorships or General Partnerships, required paper work can prove burdensome, and it is a separate taxable entity which results in more paperwork.

Do your research, look at all of the advantages and drawbacks of each entity as they apply to your home-based business, and consult a legal and tax professional for advice prior to making your final decision. Being well informed before you consult your professional legal and tax advisors will result in both lower fees and a more appropriate result.

In my opinion, the best and most legal work from home schemes come from yourself. If you can build up a business and manufacture a product that you sell directly to your audience, then you know that you are probably working safely and enjoying it.

But the problem is that no everyone has a product to hand that they can readily sell. Some people want to get going working almost immediately and start earning tomorrow, with a fat pay cheque arriving into the bank next week.

That is the problem, this dream almost certainly does not exist. Open any of these offers of employment that you see that involve cash transfers and you are opening yourself to being exposed to very illegal money laundering schemes. Here, it should be easy to spot it is an illegal scam – the person offering you the job has no idea who you are, where you are from or your history, yet they are willing to offer you a tidy sum and to trust you with their money. The only reason they can do that is that they are desperate and illegal.

There are also a lot of not necessarily illegal, but at least immoral schemes on offer. These offer to sell you an idea which you then use to make money. Maybe home typing. But again, although not illegal, they are very immoral as they are not really selling you a product.

So how can you identify a suitable opportunity? Well, for a start, if they make fantastic offers and trust you without knowing you, or if they are wanting cash up front to get you started, they are probably a scheme that you should instead steer clear of.

And to work legally from home does not just entail finding a suitable opportunity. You also have to stick to rules and regulations. For this, you must keep suitable records and file tax returns with the relevant authorities. Whilst we are talking about legal home working, this should not be missed.

But it does also give us a good clue for finding legal opportunities. If the so called job is legal, you will be happy to tell the authorities what it is you are doing to earn that money.

The best way to find a legal opportunity is to ignore offers that come to you and to go out seeking the work yourself. Accept that almost no genuine offer will provide a quick and easy return, unless you have some fantastic unique skill that you can use. Even something as simple as blogging can take a few months to set up correctly before you can get yourself into the position of earning an income.

So, ignore the fast, easy cash routes and track down something that takes honest work and you should be safe.