Incorporation station

Now that the annual Tax Scare season is here, perhaps it's time to take a hard look at the corporate identity of our home-based businesses.

How you classify your business makes a big difference when you file your returns with the Internal Revenue Service. For instance, if you write "freelance" anything on the "occupation" line, you can expect IRS auditors to read it as "Dedicated Hobbyist" and come hunting you. If you can identify yourself as "Petroleum Magnate," however, it's probably smooth-sailing at tax time.

Taxes are only one consideration. For financial and legal reasons too complicated to go into here, it may be to your advantage to have official business documents which classify your business as freelance, limited partnership, corporation, hopeless time sink, etc.

Setting up your business properly can affect your personal identity and improve your slacker behavior. If you start a corporation, you might work harder because you'll take it more seriously. Other people might take you seriously. Is it worth the time and expense to find out? What price self-esteem?

Let's look at these categories, and see which one best fits your personal perception of yourself and your business:

YOU MIGHT BE A FREELANCER IF:

--You, for financial and legal reasons too complicated to go into here, need to remain unfettered by official documentation and corporate flapdoodle. An example: If you frequently change your name to duck creditors, "freelance" probably describes you perfectly.

--You check your mailbox nine times a day, hoping for a paycheck.

--You check your e-mail twelve times a day, hoping for any inkling of good news.

--You're on a first-name basis with the clerks at Kinko's and the post office.

--Your net worth is so minuscule, it makes your accountant roll on the floor, snorting and giggling, until he gets uncontrollable hiccups.

YOU MIGHT NEED A LIMITED PARTNERSHIP IF:

--You, for financial and legal reasons too complicated to go into here, choose to team up with another anti-corporate soul to form a joint venture.

--You want to "limit' your involvement in the venture, such as providing encouraging words from the sidelines rather than sinking the whole nest egg into some harebrained scheme.

--You have a partner who has, ahem, limitations.

--You want to protect yourself and future generations from your partner.

--Your partner feels the same way about you.

YOU MIGHT NEED TO INCORPORATE IF:

--You, for financial and legal reasons too complicated to go into here, need to distance yourself from your business. Say you're facing lawsuits from creditors. If the business is a corporation, the creditors will sue the company and your personal obligation may be limited. In other words, you might get to keep the house.

--You want clients to believe you have actual employees.

--You're getting too big for your britches.

--You believe "Inc." on your business card will make people think you're taller.

--You "want a piece of that Enron action."

YOU MIGHT BE BANKRUPT IF:

--You, for financial and legal reasons too complicated to go into here, see that there's No Way Out.

--You've been entertaining fantasies about running away to Belize.

--You get more calls from telemarketers than from clients.

--You pick up any book and immediately turn to Chapter 11.

--You recognize that all your struggle to succeed has been a hopeless time sink, and you would've been better off working as a cubicle drone the whole time. At least you would've had benefits.

Bankruptcy isn't the end of the world, though it can be the end of your credit rating. And it can have a stifling effect on your ambitions.

What do you write in the "occupation" slot after it's all blown up in your face? We suggest "Dedicated Hobbyist."