The problem with most small businesses is that the owner must take a lot of risk. Fro example, many small businesses are sole proprietorships. The sole proprietor is a business form in which an individual is or operates as a business. This person will use his or her social security number as a business identification. This is different than having a company in that the person is responsible for all debts and legalities of the business.
Typically speaking, it is much more difficult to obtain lending for small businesses due to lack of history and assets. However, the sole proprietor is still allowed the write-offs the same as the business.
I agree with that the legal structure is very important. The structure can have a significant impact on the profitability of a company. One can see this is partnerships which are a form of organization in which the company is owned by multiple individuals. Partnerships are typically owned in equal share but in accordance with the operating agreement the company can be divided in interest. This form of ownership has only limited protection from lawsuit and from debt collection. Each partner has equal share in the business. Partnerships are beneficial in small business settings that are in stable markets. But outside of these markets they can be problematic.