Here are some other people's opinions and advice - http://classicbroncos.com/forums/showthread.php?t=77673.
Sole proprietorship, partnership and corporation are the three different legal forms of business organization.
Sole Proprietorship - Example found here - http://www.nolo.com/article.cfm/objectID/3FD19141-DB91-4FCA-BDB93416A4D05479/111/182/147/ART/.
While initially the least expensive form in which to start and conduct a business, this form provides no asset protection to the business owner, who has unlimited liability for the debts and obligations of the business, including claims by injured parties for compensatory and punitive damages. If the business is to be conducted under any name other than the name of the owner, it is necessary to file and publish a fictitious business name statement. There is no state-wide index of fictitious business names, so the name selected may be the same or confusingly similar to a name used by someone else in the State, and if the business grows and does business outside the county in which it began, this may later cause problems. This type of business is owned by only one individual. It is the most popular form of business and many partnerships and corporations that exist today, once started out as sole proprietorships.
Advantages of Sole Proprietorship: It is the least regulated form of business and is therefore easy to start and administer. The owner is allowed to keep all the profit. All funds generated from the business belong to the owner and are therefore added to his personal wealth.
Disadvantages of Sole Proprietorship: The business is not separate from the owner, thus, the owner has unlimited liability for business debts. The owners' personal assets can be used, as payment to creditors and the owners will be solely responsible for lawsuits brought against the business. The life span of the business is limited to that of the owner. The transfer of ownership may be difficult, as this process requires the sale of the business to a new owner. The capital raised to start the business is usually limited to the owner's personal wealth and the business might forgo new opportunities because of lack of sufficient funds.
Partnership - Example found here (key words: two sisters) - http://www.lataxlawyer.net/general_partnerships.html
One of the main drawbacks of this form of entity is that each general partner has unlimited personal liability for the debts and obligations of the partnership. There is ...
This solution provides a description of various liability concerns.