The subject has also been covered in the Instructors' Forum and Professional Training. In a nutshell, go and get professional advice from a qualified Accountant in practice. As everyone's circumstances are different, it would be difficult what is the best option for you. All that people can say is what worked for them.
However, Starshiptrooper, I can confirm that your 2nd option is, indeed, a big no-no!
Cheers
Whirls
PS - thanks h-r for the vote of confidence.