Ok, I admit it, I didn't do well in Business 101. Now it is starting to hurt me.
I have made the decision to go official with Stormchaser Software, so I started doing a little research on what I would be classified as, what tax forms I would need to file, etc...
After reading through it all, it seems as though the "Limited Liability Company", or "LLC", suits me best. The traditional route is to go as a "Sole Proprietor", which means that your business expenses and income are taxed just the same as your personal taxes. That means that whatever income you make gets reported on your personal taxes, and that you have to (possibly) pay income tax on it. The problem with this is that if for some reason the business goes into debt, it is the proprietor's financial responsibility, and that THEY have to pay for all the debt or face the consequences.
The following is a quote from Secretary of State guidelines.
Limited Liability Company: An LLC is a formal association which combines the advantage of a corporation's limited liability and the flexibility and single taxation of a general partnership. An LLC has members rather than shareholders. A member enjoys protections from the liabilities and debts of the LLC. Although not required by law, an LLC should operate under an Operating Agreement which is like a Partnership Agreement. TAX: If the LLC qualifies under IRS guidelines, it may be taxed only once, like a partnership, at the employee or member level, while not having the same restrictions as an S-Corporation.
To me, this seems more reasonable. I don't want to have to worry about my truck being repo-ed because, worst case scenario, something happened with the business that caused it to go bankrupt.
I'll be talking with a lawyer within the next couple weeks to discuss it. I know right now, though, that taxes are going to be a pain in the groin this year.