India, Feb. 6 -- The most common business structure in America is also the riskiest one. Sole proprietorships account for roughly 73 percent of all U.S. businesses, according to the IRS. Most of them were never formally "started" at all-if you earn income from freelance work, consulting, or selling goods without forming a separate entity, you're a sole proprietor by default. No paperwork required. No filing fee. And no legal barrier between your business debts and your personal bank account.

The alternative that most small business owners eventually consider is a limited liability company. An LLC creates a legal wall between you and your business. It costs something to set up-filing fees range from $35 to $500 depending on the state-and ...