There are many different types of business entities, including corporations, general partnerships, limited partnerships, limited liability partnerships, limited liability companies, and even sole proprietorships. Historically, the most popular type of entity was the corporation, but in the last ten years, the limited liability company (LLC) has become the entity of choice. The reasons for this shift are that an LLC provides its owners with limited liability protection (like a corporation) and more favorable tax treatment (like a partnership). Since the rights and obligations of owners are largely contractual, an LLC also provides its owners with greater flexibility in structuring management, voting and economic terms.
The corporation, however, remains an important entity, especially since it may provide its owners with favorable tax treatment by electing to be treated as an S corporation. As a result, this paper summarizes some of the general advantages and disadvantages of corporations, S corporations and LLCs, and then reviews the more important characteristics of these three types of business entities.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.