I want to set up a home business based in Texas, U.S.A. I shall be
involved in selling products and, possibly, involving clients
throughout the U.S.A. and Canada in setting up their own home business
modeled on my own. All of my activities will utilize the  internet
(advertizing my business model and selling of products). Newspapers
throughout the U.S.A. and Canada will also be utilized to promote my
busness.
My question: Do I setup my business as a corporation, Limited
Liability corporation, sole proprietorship, etc.
Laws and regulations vary state by state so I need to determine what
regulations I must adhere to in Texas.

Thanks,
John

Dear switchback:

A variety of business structures are available to you in Texas.  Which
one is right for you depends upon your concerns about being personal
liable for your business activities, how complicated you want things
to be from an accounting and tax standpoint, and whether or not you
will employ any employees.

Sole proprietorships are the simplest form of business structure, but
the sole proprietor is personally liable for all debts, and the
business ownership cannot be transferred to another person.  Federal
taxes for the business are handled through personal income tax
filings, and the business is not subject to the state franchise tax.

Corporations and limited liability companies create a legal separation
between the business and its owners, thereby protecting the owners'
personal assets.  These entities are subject to the state franchise
tax.  Depending upon the structure selected, federal taxes may be
handled through personal income tax filings or the business may have
to file separately.

Choosing a business structure and complying with the relevant
regulations can be challenging, so I strongly encourage you to consult
with an accountant and an attorney before you make a selection.

Here are some resources that will allow you to gain a deeper
understanding of the options available to you and their implications:

The Texas Secretary of State web site provides a great deal of
information about establishing a business in Texas.

"Selecting a Business Structure" Texas Secretary of State
http://www.sos.state.tx.us/corp/businessstructure.shtml provides a
description of the various business structures available to you as a
Texas business.

"About the Corporations Section FAQ's" Texas Secretary of State
http://www.sos.state.tx.us/corp/generalfaqs.shtml provides a wide
variety of information in a question-and-answer format.  A number of
additional FAQs are available under the heading "Business Organization
FAQs" on the right hand side of the page.  Of particular interest to
you may be "Formation"
http://www.sos.state.tx.us/corp/businessfaqs.shtml#Formation.

Corporations and limited liabilities companies in Texas are required
to pay a franchise tax.  For more information about this tax, see
"Frequently Asked Questions" Window on State Government
http://www.window.state.tx.us/taxinfo/franchise/franfaq.html.

Another excellent source of information is "4 Steps to Starting a
Business" Texas Economic Development" http://tded.state.tx.us/guide/. 
This source provides comprehensive information about business licenses
and permits as well as business structures.

Please allow me to again emphasize the importance of consulting with
legal and accounting professionals before establishing your business. 
Many businesses fail simply because they fail to comply with
regulations regarding taxation and issues arising with employees, such
as providing workers compensation benefits and handling payroll taxes
properly.

Good luck with your new business!

Sincerely,

Wonko

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Clarification of Answer by wonko-ga on 01 Oct 2005 10:43 PDT

I also wanted to point out that you can form a for-profit corporation
Texas even if you are the only physical person owning and managing it:

"The Texas Business Corporation Act requires that there be at least
one director in a corporation and two officers. The required officers
are a President and a Secretary. One natural person may hold both
offices and be the sole director. That one person may also be the sole
shareholder."

"Formation" http://www.sos.state.tx.us/corp/businessfaqs.shtml#Formation

Sincerely,

Wonko

The researcher has provided me several links to each part of my
question thus permitting  further investigation to my final objective