I’m always astonished at how many people I come across who are doing business, but do not have an organized legal business entity.

My primary company provides training solutions to the Direct Selling Industry. As I go about the country visiting with independent business owners, I find that most have no separation between themselves and their business activities.

One time, I was working with two large cattle ranches each worth millions of dollars. When I asked them about legal business structures there were none. They were operating as sole proprietors.

If you are doing business, form an entity.

First, what is a legal business entity? A legal business entity means that you have selected a name for your business and have gone down to the Secretary of State’s office in your particular state and registered as a business.

Business entities are most commonly formed as C-Corporations or Limited Liability Companies. C-Corporations can then be filed as a Sub-Chapter S Corporation, which allows you to record your income on your personal tax return.

Many people are confused about how to register a business and what structures work best for them. Your accountant and/or business attorney can help you decide which type of structure is best for you. I am neither an attorney nor an accountant.

The most important points about being in business are tax and legal issues. Your first rule of thumb is to keep your finances and expenses completely separate. Keep separate bank accounts and do not run personal expenses through your business account. It can void the legitimacy of your business in legal or tax disputes.

To form a business entity visit the Secretary of State’s website for your state and follow the instruction. In most states, you will go down to the Department of State and fill out a registration form, turn it in, and pay your state’s registration fee.

Next, you will want to visit the IRS and get an EIN (Employer Identification Number). You will take your company articles, Business Registration Number and EIN to a bank of your choice and set up a business bank account.

Some advisers may say to wait to form an entity until you have significant income. I would say that if you are going to be in business, begin establishing it right from the beginning; sometimes it can be difficult to re-organize the way you do things once you start. Businesses tend to grow on an upward trend making it increasingly difficult to make changes later on.