Going It Alone If you're flying solo, this form of business may be the best way to go.

The simplest structure is the sole proprietorship, which usually involves just one individual who owns and operates the enterprise. If you intend to work alone, this may be the way to go.

The tax aspects of a sole proprietorship are especially appealing because income and expenses from the business are included on your personal income tax return, Form 1040. Your profits and losses are first recorded on a tax form called Schedule C, which is filed along with your 1040. Then the "bottom-line amount" from Schedule C is transferred to your personal tax return. This aspect is especially attractive because business losses you suffer may offset income earned from other sources.

As a sole proprietor, you must also file a Schedule SE with Form 1040. You use Schedule SE to calculate how much self-employment tax you owe. In addition to paying annual self-employment taxes, you must also make quarterly estimated tax payments on your income. Currently, self-employed individuals with net earnings of $400 or more must make estimated tax payments to cover their tax liability. If your prior year's adjusted gross income is less than $150,000, your estimated tax payments must be at least 90 percent of your current year's tax liability or 100 percent of the prior year's liability, whichever is less. The federal government permits you to pay estimated taxes in four equal amounts throughout the year on the 15th of April, June, September and January.

With a sole proprietorship, your business earnings are taxed only once, unlike other business structures. Another big plus is that you have complete control of your business-you make all the decisions.

There are a few disadvantages to consider, however. Selecting the sole proprietorship business structure means you are personally liable for your company's liabilities. As a result, you are placing your own assets at risk, and they could be seized to satisfy a business debt or legal claim filed against you.

Raising money for a sole proprietorship can also be difficult. Banks and other financing sources are reluctant to make business loans to sole proprietorships. In most cases, you will have to depend on your own financing sources, such as savings, home equity or family loans.

From Start Your Own Business: The Only Start-Up Book You'll Ever Need, by Rieva Lesonsky and the staff of Entrepreneur Magazine (Entrepreneur Press)