Julian said:
Self employment can still be considered a business. Its called a sole proprietorship.
Don't get confused here.
A plumber might own "Joe's Plumbing" under and type of entity, the worst one being a sole proprietorship, but he can also own it under an LLC, an S-corp, or a C-corp, where if he is still essentially "self employed".
When I speak of self employment for this purpose what I am talking about is that although you technically "own a business", the business really owns YOU.
In other words, the income from a labor based business that is a one man operation is derived solely from the efforts of the individual, and as such it should be distinguished from a "business" in the sense that if it were a true business, the income could come in regardless of his involvement.
Now that doesn't mean that having a day to day part in your company is a bad thing (rest assured you will almost always have to bust your ass to get it off the ground) but the goal should be to build a REAL business that can support itself AND leave dividend income for you.
This will usually mean that you will have to get enough business to hire employees to work underneath you, and once this happens it will show you a whole 'nother facet to running a business that you might never have counted on. Think of all of the lazy idiots you have worked with in the past. Well, if you get good at weeding some of them out in the hiring process you can minimize the number of them that you employ, but rest assured, you will be stolen from, lied to, and manipulated more than you can imagine.
As for liability- as a one man band you should at least structure your business as an LLC. Doesn't mean that you won't be immune if someone sues you, but you AND your employees will be responsible for a whole bunch of sh!t when anyone operates under your name. And be prepared for people to accuse you of messing something up when you know that you couldn't possibly have damaged it. It WILL happen.
The good thing for you is that generally people will look at a one man operation as small fish and you aren't likely to get a lot of lawsuits unless you get bigger. Once that happens, you have a target painted on your back though.
Good luck.