There's probably nothing as satisfying as going to work for oneself, setting your own hours and getting paid directly for the work you do. So far so good, right? Now consider something else: Headline-grabbing incidents pertaining to businesses being sued for millions of dollars come to light very day. Let's not forget that we live in a deeply litigious environment where the slightest slip-up could drain you of your resources. If you are a small to medium-sized business owner you would be aware that most states in the US allow you to open a business in as less as $100, or even less. Being a sole business owner, however, means that you don't get any protection as far as your assets are concerned. Tax benefits also do not accrue to you. You can go into a partnership, of course. But be warned: you can be held responsible for your partner's fool-hardiness or excesses. Lawyers advise drawing up a contract beforehand. This too, can invite headaches for you if your partner goes bankrupt in which case you will be required to pay his her debts. The best course to take, if you are going to become a business owner, is to take up a limited liability partnership or LLP which protects you against double taxation among other things.

Obviously, business cannot be conducted in a vacuum. While entering into a business agreement with another party, it is best to be wary and keep your ears pinned to the ground. What we mean by that is, you are best advised to put all your communication into writing. This way you can avoid costly misunderstandings, heart-burn and ultimately, ill-health.

While drawing up an agreement make sure that you and the other party or parties understand exactly what each term means. Very often, a deal is likely to change, especially with regard to deadlines etc; make sure the agreement reflects the provisions for change. A well thought out and well written agreement will save you from unnecessary hassles and disputes. A word of caution, actually a golden rule: anybody refusing to or showing reluctance to enter into a written agreement should not be entertained.

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 If you own a business you have probably been told to just set up an LLC or Corporation and you are protected. Unfortunately, this strategy may not protect you. In many cases it is most effective to have multiple entities to separate the business from the assets. Yes, you can use an LLC to manage the business but it may be unwise to hold significant assets in the LLC. Really you will need to have at least 2 entities to run a business. This causes more separation and therefore more protection for you and your family.

Simply owning a business can help you save thousands on taxes and help protect what you own. This holds true more most Americans even if they do not have a large business. Home based or asset management businesses can do wonders for your tax bill.

Although every business is different, the general rule of thumb is to have at least two business entities. One to manage the business and one to own the assets of the business.

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Many business owners use the sole proprietorship because it is easy to set up, maintain, and take deductions. Unfortunately, this is where the benefits end.

Basically, if you do not choose a business entity then by default you become a sole proprietor and are limited by the number of deductions you can take. In other words, it is the "bottom of the barrell, " for deductions. At least take a look at other entities like the LLC or Corporation. You might find that you have been missing out on some great tax deductions.

Statistically, by using a sole proprietorship you are ten times more likely to be audited by the IRS. Most likely this is because there are so many more sole proprietors than any other business entity.

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