I'm going to be starting a business making custom hardwood furniture, and I'm currently mulling over my options in terms of what form the business should take. Limited Liability Company (LLC) Sole Proprietor (SP) Of course, I'll be talking to an accountant about this, but was wondering whether others might have experience in this area so I have as much background info as possible before taking professional advice. A bit of background... The business will require at least $10-$15k initial capital investment in machinery. In addition, I will probably need to rent some commercial space to use as a workshop, so figure between $200 and $400 a month for this. I have not yet investigated the cost of business liability insurance. This seems to be one of the major considerations before going with an LLC or SP. If a joint on a piece of furniture fails and someone is injured as a result, I could be liable. My wife and I have significant personal assets (house, vehicles, investment portfolio) that could be pursued, and I of course want to protect us from that possibility. However, the cost of insurance could be several hundred dollars a month which, added to the cost of shop space, puts me several hundred bucks in the red before I even start. I prefer the idea of going with SP rather than LLC purely from a simplicity standpoint, but this liability thing is a real issue. No country in the world sues quite as happily or readily as America. As I am starting up a business, I will need to develop a line of furniture and a website. In total this could take up to a year, so I am thinking that as a worst case scenario I will spend up to 12 months making speculative pieces to allow me to market myself. Let's say for the sake of argument that I do not have any paying clients during this time. As I understand it, I can choose "Flow Through" or "Entity" taxation with an LLC, but only "Flow Through" as a SP. The following are major questions I am asking myself.... - If my wife is working (not for me), what is the best way to allow me to offset the tax she pays from her salary against the initial losses incurred by the business? I gather I can share ownership of an SP with her, whether she and I file jointly or separately. - What is the best structure to allow me to depreciate the initial CapEx over a number of years, seeing as in the first year the business will possibly not have an income? - Does it make sense to form a SP for the first year, and then potentially switch to an LLC later? This is particularly relevant in future where I may want to leave some income in the business as retained profits, rather than have these profits included on my personal return. I could go on with other questions, but those are the main ones for right now. Any insights much appreciated.