There are several ways to structure your writing business. Most writers, and especially those just starting out, are considered “sole proprietors.” You also can set up a limited liability company, or LLC, with yourself as the only member, or you can structure your business as a partnership with someone else, or as a corporation. Laws governing these and other business structures vary widely from state to state, and each business structure has its own advantages and disadvantages. You might want to do some research about the laws in your state, or consult an attorney about your situation.
The “sole proprietor” structure is the least formal, and it's the one most writers use. As a sole proprietor, your income, expenses, depreciation, and losses from your writing are included on Schedule C in your personal income tax return. Other business structures require separate tax returns.
Bestselling authors often set up limited liability companies, or LLCs, for each of their titles to protect other assets in the event of a lawsuit. Beginning writers usually don't have to worry about this, but you might want to consult an attorney experienced in both business law and in working with writers and artists.