4. What are the main types of business entities?
The main types of business entity discussed in this chapter are:
• Sole Proprietorships – The sole proprietorship is not considered a separate business entity, but it is the basis from which business entities are defined.
• General Partnerships – The general partnership is the most basic type of business entity. While the general partnership is commonly understood to be a legal business entity, some legal theorists do not regard the partnership as a formal legal entity.
• Limited Partnerships – This is a hybrid form of partnership that allows for a class of partner known as a “limited partner”.
• Limited Liability Limited Partnership – This is a hybrid form of partnership that allows professional practitioners to organize as partners with limited personal liability.
• Limited Liability Companies – This is the most common form of business entity in the United States. The reason for this fact is based upon the blend of informal and protective characteristics of the LLC.
• Corporations – The corporations is the oldest form of business entity. The corporation is generally divided based upon its tax status as C-Corporation, S-Corporation, and non-profit Corporation.
Some of the less-common types of business entity are the limited liability limited partnership (LLLP) and the professional corporation (PC). The LLLP is a special purpose entity generally used as part of special project, such as a real estate project. A professional corporation is a corporate form for small practitioner firms that is rarely used because of the unfavorable 25% flat corporate tax rate.