Choosing the right legal structure is important for any business, even a home-based virtual assistant business. It is one of the first decisions you must make when you first start your business. Choosing your legal structure is quite simple and is based on whether you will be the sole owner, will be partnering with one or more individuals, or feel that you would like to incorporate your business. The process of the different legal structures, however, differs and can become complex and expensive. Below you will find the difference in the legal structures allowing you to decide which one best suits your business.

Sole Proprietor simply means that you are the sole (only) owner. A sole proprietorship is the easiest, quickest, and least expensive legal structure to set up and maintain. Many VA’s choose this option because it allows them to get started with their business quickly as well as have complete control over their business. In addition, VA’s do not have to worry about all legal requirements that are required for partnerships and corporations. Best of all, sole proprietors get to keep the profits.

One drawback of a sole proprietorship is that all legal actions as well as taxes brought upon this business become your responsibility. However, in most cases of sole proprietorships, the advantages outweigh the disadvantages. This may be why the majority of small businesses are set up as a sole proprietorship.

Partnership means that there are one or more partners running the business. In the beginning, all persons within the partnership must be aware of what each person can do and what each person will do. Other aspects one should take into consideration are the amount of funds that will be needed for this business, where the funds will be coming from, and whether the partnership will be a 50/50 partnership. Based on this information you should write up a Partnership Agreement that states how your partnership will operate.

The legal structure of a partnership is much different from that of a sole proprietorship. With a partnership there is a limited life. In other words, while one VA may wish to continue with the business, the other VA may want to move on to other opportunities. This can cause many problems when everything within that business falls onto one person’s shoulders. Therefore, everyone within a partnership should be prepared for the future, if things do happen to change, and partners within the business go their separate ways.

Other things to take into consideration before starting a partnership is that you will be sharing the profits as well as management responsibilities. There is not only one of you running this business, but there are two or more. Everything within this business should be shared as stated in the Partnership Agreement.

Corporations are much different from that of a sole proprietorship and partnership due to the fact that it involves liability and tax laws. In fact, corporations are the most complicated of the legal structures. A corporation is a legal entity, meaning that it is separate from the person that owns the business. In other words, if a corporation is unsuccessful, the owners personal assets are protected, and therefore, are not at risk. Corporations, however, are required to pay more taxes. They are actually taxed twice on their corporate profits. The first tax is on the corporate income and the second tax is on the shareholders’ dividends. This, in turn, requires more taxes to be paid out versus that of a sole proprietorship or partnership.

There are also two other forms of a corporation that may be of interest to you. They are:

S Corporation is similar to a corporation as well as a sole proprietorship in that they offer limited liability but you are not required to pay additional taxes that are required of a regular corporation.

Limited Liability Corporation, or LLC is similar to a corporation as well as a partnership in that the owner’s personal assets are protected but the taxes are the sole responsibility of the owner, not the entity.

Though a corporation may be the most complicated of the legal structures, they can easily be set up with the help of the appropriate organization. If you feel that your business should be incorporated then you should do so with a reputable company. Incorporate your business with a company you can trust. From Intuit, the makers of Turbo Tax and QuickBooks, MyCorporation is the easy, affordable way to incorporate online.