Avvo provides a guide to your rights and responsibilities as a freelancer including guidance on when to incoporate. Avvo says:
When to incorporate
At some point, many freelancers wonder if they should incorporate or just operate as a sole proprietor.
Sole proprietorship is simpler. If you work as yourself, using your own name, you don’t have to do anything special. Just report your freelance income on your personal tax return.
If you want to use a business name—something different from your own legal name—you’ll file a “doing business as” declaration. This lets the public know that you are the person behind your business’ name.
Your other option is to form a separate business entity, either a limited liability company (LLC) or a corporation. The LLC is a popular option for freelancers, because it’s more flexible and requires less paperwork than a corporation.
An LLC may offer some advantages over a sole proprietorship:
- Your personal assets are protected from your business’ debts.
- If you hire employees, only your business can be held liable for their actions.
- LLCs can choose to be taxed as an S-corporation, which may save on taxes.
These protections aren’t absolute. If you are negligent in performing the work, you could be personally liable for any negative impacts on your client. You may also forfeit the personal assets protections if you’re not careful about keeping business and personal finances separate.
Depending on your industry and preferred clients, you may find it easier to find work if you form a business entity. Many large companies prefer to work with other companies rather than individuals.
Read the full story at The ultimate guide to independent contract work