Organizing your business into a “legal entity” can protect you and your work. Forming a legal entity can impact the amount of taxes that you have to pay, if you’re personally on the hook for all of your business debts, and whether or not you’re liable for other business-related problems. It can even help you land bigger jobs and make you look more professional.
There are three main types of legal entities that freelancers working on their own should consider:
Sole Proprietorship
Corporation (C Corporation & S Corporation)
Limited Liability Company (LLC)
It’s important to understand the pros and cons of each type before deciding what legal entity will work best for you and your business. So you should consult with a lawyer and/or an accountant when weighing out your options.