Forming an entity really has nothing to do with raising money. If you are going to share equity with another person or persons, whether they are active or passive, be sure to get advice from your accountant and attorney about the best structure for your deal. Just please don't hold a business as either a sole proprietorship or general partnership. The most common entities are C-Corp, S-Corp, LLC, or Limited Partnership. Go to www.legalzoom.com [1] for more explanation of the differences between these entities.