What Are the Different Types of Business Entities?

When starting a business, you need to consider the different types of business entities.

In the United States, there are more than 9.6 million people are self-employed in 2016, though this number is projected to rise by almost another million in the next six years.

But the real question is, how to choose a business structure from all the options?

For interested business owners looking for the best, check out this comprehensive guide of the different types of business entities.

Read on to learn more.

S Corporations

It can be overwhelming to know how to choose a business entity, but the first step is to look at all of your options. One of the most common kinds of businesses is S Corporations.

S Corporations separate your business debts from your personal assets. All shareholders must be U.S. citizens or residents and owners must share the loss and profit in the business on personal tax returns.

The tax and legal structures are independent of their owners. Check out this link for more information from Pacific Group LA.

C Corporations

Consider choosing a C Corporation if you’re looking for no limit to your shareholders. Be aware, in a C Corporation you are taxed on both shareholder and corporate profit dividends.

You must host an annual meeting with recorded minutes!

Limited Liability Companies (LLCs)

A Limited Liability Company (LLC) is a unique business entity in that it can do one of two things:

  1. Combine the pass-through taxation of multiple owners
  2. Give sole proprietorship with the finite liability of a business

There is no limit to the number of owners the business may have and no requirement for an annual meeting and records. A Limited Liability Company is run by operating agreements.


One of the best business legal structures is Partnerships. In a Partnership, each member is personally liable for any lawsuits that may be filed against the business or corporation.

In most instances, you don’t need to file an additional form to create a Partnership business model and it is one of the most straight forward to design and operate. It is an excellent choice for those just starting in the business world.

All owners are required to report the loss and profit of the business on their personal tax returns.

Sole Proprietorships

Check out a Sole Proprietorship, or a sole trader, if you’re an individual entrepreneur and looking to run a business on your own. In this business model, neither the owner nor the business entity has a legal distinction.

Different Types of Business Entities

It can be overwhelming to decide which types of business entities are right for you and your business. Remember to consider all of your options, research, and consult your partners before making any major changes.

What are you waiting for? Your future business model awaits!

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