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Common types of business entities

On Behalf of | May 27, 2021 | Business Formation |

In recent years, the LLC business entity has become one of the most popular throughout the United States. This type of
entity helps to protect Texas business owners from being held personally liable for any of the business’s liabilities. However, an LLC is not always the best option depending on your individual circumstances and the type of industry that you’re in.

Sole proprietorship

One of the most common types of entities established during business formation is a sole proprietorship. This is the simplest business entity out there and is used for many small businesses. With this type of business entity, there’s one person who owns the business, and they might operate it out of their home. From a tax standpoint, this type of business entity is considered one and the same as the business owner. Owners who want to reduce their personal liability may consider an LLC instead.


When there’s more than one owner for a small business, it’s likely to be set up as a partnership. With this type of business entity, both partners share a specific interest in the business, including their profits and expenses. While the business does submit a return with the IRS, all partners submit a K-1 form that shows any income they received from the business throughout the year. A partnership can be set up as an LLC with multiple partners.

C Corporation

When it comes to larger businesses, C corporations are a very common type of business entity to establish. With this type of entity, there aren’t any owners of the business. Rather, there are shareholders. Contrary to popular belief, one person can hold 100% of all the shares in the business when they have a C corporation. However, most of the time, there are different shareholders who own the business.

The United States allows for many different types of business entities to be established. Before you decide whether an LLC is right for you, it’s important to assess the implications of the other types available to you. It’s always advisable to seek the help of an attorney when determining what type of business entity you should establish.