skip to Main Content
Types Of Business Entities

Types of Business Entities

If you are considering or are ready to officialize your business, you will need to choose a business entity to stand in the market. It will make your business become professional, and from this point, all your work and deals with other companies or clients whill be done professionally and in writing. Here are the types of business entities you can consider.

Sole Proprietorship

The easiest way to make your business official is to make it a sole proprietorship business. You do not require any formal procedure to make a business your own except for a few accounting requirements. You do not need to pay separate tax for your business and only pay your personal income tax return. You can also exchange personal and business assets easily and professionally. But as your personal and business assets are the same, they are also liable to become a problem from two different sectors.



Another easy business entity is a partnership which allows you are ease on your finance and management by dividing it between two or more ownerships. It makes all the income and deductions to get distributed among the partners according to their shares in the business. Incase of any problems from any one of the partners, the business can face trouble. So it is important that the foundation of partnership is built over the trust, and all the debts and losses should be checked properly.

Some business partnerships will require all directors and shareholders to undergo a credit check to ensure everybody is legally eligible to be a director of a company. In the UK, if a director has gone insolvent or bankrupt this may cause them to be struck off the directors register and may prevent them from becoming a director of a company for a certain amount of years. Although a credit check is usually the norm for a new director joining any business, this is not always the case as there are some companies that do not perform any credit checks such as

Limited Liability Partnership

A limited liability partnership is similar to a general partnership except that LLP can register with the department of state. It makes sure that the partners in a business are not liable for any obligations and liabilities due to negligence, omissions, misconduct, and malpractice. However, LLP does not offer complete liability protection, and there are still other liability issues outside the personal factors.


Limited Liability Company

The corporate entities can take advantage of a limited liability company or LLC entity. It is a hybrid entity which offers liability protection for a C corporation. In an LLC, the tax options can be treated as a partnership or a corporation. LLC can also provide flexibility, unlimited members, ease of operation and possibilities of expansion. An LLC is governed by an operating agreement explaining the planning and finance of the entire business. This agreement will come in use while looking for loans and setting up bank accounts.

S Corporation

S corporation is a special form which is taxed like a partnership. S corporation has some strict regulations in its structure and cannot exploit it once is it signed and approved. It is an appropriate business entity for small and medium businesses. It allows the owner to pay the taxes through the deductions from the entire organization, which makes tax paying easier. But it also means that any problems in the management can affect the entire business and violation of regulations from any member of the company will affect the entire tax record of the company.