The LLC, or Limited Liability Company, is the new entity of choice for both experienced entrepreneurs and new start-ups. The one-person corporation is being replaced by the one-memnber LLC.

An LLC combines the liability protection of a corporation with the flexibility and ease of filing as a sole proprietorship.

Every small business, even those that in the past would not have elected to incorporate, should register as an LLC. If you own rental property it is a good idea to put title to the property in an LLC. If you own more than one rental property you should have a separate LLC for each property.

One thing to keep in mind when setting up your business is that, like a corporation, an LLC should be treated as a separate legal entity. Here are some things you should do:

* If your business will have employees you will need to apply for a federal Employer Identification Number. This can be done online at www.irs.gov. Click on "Businesses" under "Information for", and then click on "Employer ID Numbers" under "Related Topics". A one-member LLC that does not have employees does not need a federal ID number. You can use your Social Security number.

* Open a separate checking account in the name of the LLC. Deposit all business income to this account and pay all business expenses from it. Avoid using your personal checkbook for business activity and try not to pay personal bills from the business account. If the balance in the LLC account is low, you can "loan" money to the business. Be sure to identify all such deposits as loans in the check register. Reimburse yourself for cash payments, automobile use and home-office use, and pay yourself a "drawings" by writing a check from the LLC account.

* All business leases for office or storage space and equipment should be in the name of the LLC, as well as all business insurance policies (i.e. liability, office overhead, workers' compensation).

* All store credit card accounts for business purchases (i.e. Staples, Office Max or Office Depot, Lowes or Office Depot) should be in the name of the LLC. Have a bank or American Express credit card in the name of the LLC and use it exclusively for business purposes.

* The name of the LLC should appear on all business stationery, letterhead and billhead, and all business forms and applications.

*The LLC should hold "title" to all business equipment, copyrights and trademarks. If you own "real property", such as an office building or storage facility, which is used by the business, have title held by a separate LLC.

A one-member LLC will report income and expenses on Schedule C of the owner's Form 1040. An LLC does not have to file a separate tax return, as one would for a corporation.

A loss from the LLC can be deducted against other taxable income of the owner, such as wages, interest and dividends and capital gains, to reduce Adjusted Gross Income. Any profit from the LLC will be subject to "self-employment tax", 50% of which can be claimed as an "above-the-line" deduction on Page 1 of the Form 1040. The owner may also claim an "above-the-line" deduction for qualifying health insurance premiums and contributions to a Keogh, SEP or SIMPLE self-employed pension plan.