If you are starting a sole proprietorship, all you need is a business license. The biggest problem is that if a sole proprietor is sued, all his personal assets are at stake as well. Especially in computer consulting, liability is a major issue.
When two or more people are working together, they can form a partnership. You must draft Articles of Partnership and apply for a business license. Liability is once again an issue because if one partner skips town, the other is liable for his debts.
A corporation is formed through state governments. Incorporation papers and capital stock are required. Since the papers have to be approved and often drafted by a lawyer, this type of setup requires a larger investment. In a lawsuit, though, you have limited liability and selling the corporation is simple. There is also the issue of double taxation.
Limited Liability Company (LLC)
An LLC provides a company with the tax benefits of a partnership and the limited liability of a corporation. Since these often do not require a lawyer, they can be a less expensive and time-consuming alternative to a corporation.
Learn more about the types of business structures available in the complete article (link above).
Submitted by Computer Consulting 101