A business can be formed as a Corporation, a Partnership, a Limited Liability Company (LLC), or a Sole Proprietorship.

Corporation
A corporation is a legal entity chartered by a state that is separate and distinct from the persons who own it. A corporation may own property, incur debts, sue or be sued. Some distinguishing features of corporations are that stockholders have limited liability (they can only lose what they invest), transfer of ownership is accomplished through the sale of stock shares and it has perpetual existence.

Partnership
A partnership is a business venture having at least two owners (“partners”) who agree to pool their funds and talents and who will share in the profits and losses of the enterprise. General partners are those who are responsible for the day-to-day management of activities, whose individual acts are binding on all the partners, and who are personally responsible for the partnership's total liabilities. Limited partners are those who contribute only money and are not involved in management decisions and whose liability is limited to the amount of their investment.

Limited Liability Company (LLC)
A limited liability company or “LLC” is a legal entity form that provides limited liability for its owners (“members”) similar to a corporation, but may be taxed as either a partnership or corporation if there are two or more owners. If the LLC has only one member, it is taxed as a sole proprietorship. Since it has the legal advantages of a corporation and the flexibility of a partnership, this is often the optimal form of many privately-held businesses.

Sole Proprietorship
A sole proprietorship is the simplest and most common form of small business. It is an unincorporated business with a single owner who is personally liable for business debts and claims against the business. The operating results of the business are reflected on the owner’s personal tax returns and are considered self-employment income.