Let’s say you’re thinking about ditching your job and joining the legion of free agents, or you’re just settling into your new career as a small business owner. Here’s an issue that may be keeping you awake at night: Should I incorporate, or should I be a plain old sole proprietor?

Alas, contrary to the simplistic advice that some incorporation promoters will give you, determining the right form of organization for your business can be tricky. We’re going to suggest a framework for the issues that should help you take your first steps toward a wise decision.

It’s not pleasant to think about, but suppose your business takes on too much debt and goes bankrupt or finds itself on the wrong end of a $1 million judgment in a negligence suit. Will your creditors or the people suing you go after your personal bank account, your house, your furniture?

If they do and your business is incorporated, your personal assets may be protected. But "if you’re working for yourself, then incorporating usually doesn’t protect you against liability," warns Peter Kent, author of Making Money in Technical Writing.

On the other hand, incorporation can help shield your personal assets in case your partners or other officers in the company are negligent but you are not, according to Kent and legal experts. So if your business is more than a one-person operation, incorporation may be a good idea.

There are complex financial consequences that you should consider before deciding whether to incorporate. For example, if you do incorporate, you’ll be an employee of the corporation, even if you are its only employee. And if your company is organized as a so-called C corporation, 100 percent of fringe benefit costs, such as medical and dental benefits, will be tax-deductible for the business. These benefits are only partially deductible if you forgo incorporation and operate as a self-employed sole proprietor.

But you won’t have the same kinds of flexibility with the profits of a corporation that you have with your own bank account. You can have the corporation pay you a salary and stock dividends, but there are limits on how much of the profits you can take out of the corporation to pay the mortgage or buy milk.

Furthermore, although there are tax advantages to incorporation under certain circumstances, your paperwork and tax preparation burden will be substantially larger than if you’re a sole proprietor. In some cases, the additional accounting costs could wipe out the tax savings, if there are any. And you may need legal advice as well.

"You’ve got to run the corporation correctly, have the right meetings, fill out the right forms," says Kent. If you don’t follow all of the complex rules governing corporations, legal opponents may argue that you’re actually operating as a sole proprietor, which could allow them to go after your personal assets.

You will need professional advice to help you decide whether to incorporate, and that’s something we don’t intend to provide in this article. But that doesn’t mean you have to pay an accountant and a lawyer hundreds of dollars per hour to teach you all the details or talk over your head. Instead, start by reading a book on the subject and forming your own opinion about whether you should incorporate or form another business entity such as a partnership or limited liability company (LLC).

Then take your ideas and remaining questions to an accountant and a lawyer for brief, focused consultations. If they advise you to form a business entity, push hard for the reasoning behind their conclusions. "If you’re going to incorporate, you should really understand why you’re doing it," says Kent.