Here we continue with our series on the trials and tribulations of starting a craft business. Shall we learn together?

When considering how to structure the legal part of your business, there are several things to think about and take into consideration. Here is a quick run down of the different options you have when forming the structure of your business:

The most simplest structure is the Sole Proprietor. This pretty much means you as the sole owner of the company. You have the most control over your business and it is the easiest to set up when registering. The downside here is that as the owner, you are personally liable for everything that your company does.

If you want to go into business with a partner, the next easiest structure to set up is a General Partnership. It generally acts like a Sole Proprietorship, except with two or more people. If you go into business with someone make sure you spell out how things are going to run. You are both responsible and liable for the company and are responsible for each other. In instances where you don’t agree with something that your partner does, you are still held responsible.

If you are looking for more protection, or a layer between your business and your personal assests, a Limited Liability Company may be for you. This structure gives the owner more protection within this setup. It is more expensive and time consuming to set up and a lawyer is usually needed to do so properly.

There is also a Limited Liability Partnership that works in the same way as an LLC, but for two or more partners in a business. There is also a partnership structure between a General Partnership and a Limited Liability Partnership, called a Limited Partnership.

There are also an C-Corporation and an S-Corporation to consider. These involve stockholders and forms a corporation as a separate entity from its owners.

For crafters, a Sole Proprietorship is the simplest entity to form and basically covers what we need for the business to run. For me, I have always been taught that LLC’s provide the most protection, but I can see the advantages of the SP since there isn’t a whole lot needed to set one up.

Remember: please do your research when forming your business entity and consult a lawyer if necessary. The Small Business Administration has lots of resources available online, and be sure to check with your State’s governmental business office, which can tell you the requirements of your particular State.

For those of you who are incorporated. How did you set up your business and what form did you take?

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