Types of US Business Entities

US business laws allow for the creation of a variety of business entities.

These are defined as:

  • Sole Proprietorship

  • General Partnership

  • Limited Partnership

  • Limited Liability Partnership

  • Limited Liability Limited Partnership

  • Corporation (divided into C-Corp & S-Corp)

  • Non-Profit Corporation

  • Limited Liability Corporation

  • Massachusetts Trust

  • Trust

  • Joint Venture

  • Tenants in Common

  • Municipality

  • Association

Each type of business entity has its advantages and disadvantages and the choice of which to proceed with is usually defined by the both the intent of the persons involved in the creation of the entity and the amount of liability/risk they are willing to take on.

For example, in the case of a Sole Proprietorship, the owner assumes full liability for all taxes, debts, and all legal liabilities.

In the case of a Corporation or Limited Liability Corporation (LLC) shareholders or partners are not usually liable for the debts and other obligations of the entity.

As a general rule, as the amount of liability decreases so the amount of governance and legal oversight increases, as does the difficulty in setting up the entity.

Careful consideration should be given to the creation of an entity that has the potential to evolve. It is far better to start with a slightly more complex entity than is initially required rather than try to restructure it at a later point, as restructuring may be difficult and tedious.

*The materials on this web site is for informational purposes only and are not legal advice or a substitute for legal counsel.