As Erica mentioned many moons ago, one of the first BIG decisions you make as a business-owner is what kind of business you are going to own. I know you're thinking, "No duh Liz! I want to open a sandwich shop that only makes ice cream sandwiches!" Well, that's great - but that's not what I mean. I'm talking taxes.
When you decide to throw your hat into the enterpreneurial ring, you have to decide how you want Uncle Sam to take his share. There are lots of choices: Sole Proprietorship, C-Corp, S-Corp, Limited Liability Corporation (LLC), (This site has a great chart that outlines the pros and cons of each choice.)
For me, it came down to S-Corp vs. LLC. Having worked at a business management firm, I had experience with setting up both types of corporations and I had a basic knowledge of the pros and cons. After doing a bit more research and talking to the Numbers Team, I decided to go with the S-Corp.
This is one of the most important decisions you will make. Every state is different so do your research and talk to an accountant and a lawyer.