Incorporating, LLC or Sole Proprietorship?
The legal entity of your business depends on how much you risk you want to take and how you want to file taxes...that's what it basically boils down to. Your state's Secretary of State or whatever department that registers business should have a breakdown of all the legal entities. Since you asked about sole proprietorship, LLC, and Inc...I will briefly discuss those.
Incorporating = risk limited to investment; must file with state for status; must file separately from personal taxes but it also gets complicated with different forms of corporations.
LLC = risk is limited to investment; must file with state for status.
Filing taxes depends on if you are single member LLC.
(You can file with personal taxes using Schedule C or can file separately, or multi-member LLC (must file with partnership form).
Sole Proprietorship = you assume all of the risk; do not need to file for status with state; file taxes as you normally would but use Schedule C.
I am an LLC because it fits my business and needs better.
There are a lot of local businesses, in everyones area, that specializes in setting up LLC's and Corporations. But, you can also find resources and websites online, that also do these services. I would recommend sitting down with a local business or accountant, who can properly set up your paperwork. They can answer whatever questions you have, and you can hold them accountable, if anything should go wrong.
I personally use http://Legalzoom.com, because of it's simplicity.
But, feel free to look online for what works for you.
Important Notice: This is sample advice for illustrative purposes. This sample may not be suitable for your particular circumstances and different agreements or legal arrangements may be necessary depending on your jurisdiction. Therefore, you should not use this sample, or any part, without the advice of competent legal counsel. MAKE SURE YOU CONTACT A LAWYER FOR YOUR LEGAL NEEDS.