I see you're busy planning your new business venture. Congratulations. May I ask you a question? What business structure did you choose?

You say you don't have a structure? You don't need a building yet? Oh, your project is on the web for now…

Yes, you've chosen a fine web site structure, but that's not what I meant. I'm talking about you how you've chosen to organize your business. Your Business Entity.

I see, you haven't given it any serious thought yet? You should you know, it's an important decision.

Choosing a business structure is without a doubt one of the most important business decisions you can make. Ironically, though, it's one of the first decisions you're faced with. And usually the question presents itself when you're still testing the waters when it comes to your business knowledge. This means that many individuals choose the sole proprietorship form almost by default. Many times individuals don't even consider the alternatives - the corporation and the LLC.

Here's a quick lesson in the advantages and disadvantages of the sole proprietorship.

Essentially it's the easiest form of starting a business. The name says it all - you are the only owner. And as such you have total control of the business venture.

If you don't indicate otherwise, most states consider your business to be a sole proprietorship automatically. There are several benefits to this structure. Right away, there's the lower cost of starting up the business. You don't need to consult an attorney to help draw up all the papers for a corporation. And there are no special or technical formalities, like By-Laws, that you have to follow and submit.

And once it's started, you'll have an easier time actually handling the money on a daily basis. There's no need to set up a payroll if you're only paying yourself. However, to ensure that your personal money doesn't get intertwined with your company's and vice versa, you may want to set up a separate bank account for your venture.

Tax preparation is simple as well. You still only need to file an individual tax return - the standard 1040 form that we all know and . . . well . . . hate!). You just have to be sure you include your profits and losses from your business.

But before you make your decision, consider some of the disadvantages associated with a sole proprietorship. The first comes in the form of liability. You are personally responsible for all actions of the company - both legally and financially. This means that if the business gets sued, you personally are liable for any judgment. You're also personally responsible for all debts. That means you could stand to lose your car, home, and other assets in a lawsuit, lien or judgment.

That same ease of handling money that's a benefit, however, can be viewed as a liability. Many times poor money handling habits can spell the death of a company. And going it alone only makes it easier to mess up.

You may also find that, as a sole proprietor, you may have problems raising money. Review your business plan. You certainly have planned in a certain amount of growth in the next five years. If your business structure is still in the form of a sole proprietorship, you may experience some problems raising the necessary capital to propel your company's growth. Investors normally are less likely to support a sole proprietorship than a corporation. And lenders and vendors won't take you as seriously, and won't feel you are as stable as a corporation.

Don't choose the structure of sole proprietorship solely on the fact that it's a quick, easy and relatively painless route to business ownership. Review all the requirements of your venture - including future potential growth. If you decide to stay with this structure, just be certain it suits your needs - now and in the future. It just might be that doing the paperwork for the creation of a corporation may be well worth the work. Only you can decide