If you are taking advantage of side income or income from a hobby, you have two options. You can just make the money and pay personal taxes on it, or you can set up a company and operate through the company.
If it is a low risk company and has relatively low income, I would just run the money through my personal accounts. If you have a company, you have to pay taxes on the earnings twice. You will have to pay corporate taxes on the company earnings and personal taxes on the dividends you take out from the company.
Having a company, depending on the type, can be a big liability shield. If you are involved in something that has a possibility of law suits or legal disputes, a company is a big benefit. If you are operating as a person, you can be sued for a business dispute. They can come after your personal assets. If you have a company with a specified legal status, they can only come after the assets of the company. You do pay for that in taxes though.
So, the decision is not black and white. If you are going to make a lot of money or have any possibility of legal disputes, you should set up an LLC (limited liability corporation) or corporation. If not, it is probably best to just operate as yourself (under a DBA, which stands for doing business as).
Do you have a company? How do you operate?
