Company Structures Explained: Types, Formation, and Advantages

A company is a legal entity distinct from its owners, created to conduct business. It has perpetual succession, can own property, sue/be sued, and contract in its own name.

Major Types (Common Law / US Focus)

Type	Ownership	Liability	Taxation	Key Features
Sole Proprietorship	1 individual	Unlimited personal	Pass-through (Schedule C)	Simplest; no formal formation
General Partnership	2+ partners	Joint & several unlimited	Pass-through (Form 1065)	Agreement governs; no entity shield
Limited Partnership (LP)	General + Limited partners	GP: unlimited; LP: limited to investment	Pass-through	LPs passive; GP manages
LLC (Limited Liability Company)	Members (1+)	Limited (charging order protection)	Flexible: default pass-through; can elect C/S corp	Most popular for SMBs; operating agreement governs
C Corporation	Shareholders (unlimited)	Limited	Entity-level (21% federal) + dividend tax	Public offering capable; double taxation
S Corporation	Shareholders (≤100, US persons)	Limited	Pass-through (Form 1120-S)	One class stock; eligibility restrictions
Professional Corp (PC) / PLLC	Licensed professionals	Limited (except own malpractice)	C or S election	Required for doctors, lawyers, CPAs in many states
B Corp (Benefit Corporation)	Shareholders	Limited	C or S	Legal mandate for social/environmental goals + profit

Incorporation Benefits

• Liability Shield: Personal assets protected from business debts (if formalities kept).
• Capital Access: Equity issuance, debt financing, investor confidence.
• Perpetuity: Survives owner death/departure.
• Tax Planning: Fringe benefits, retained earnings, income splitting (C corp), QBI deduction (pass-through).
• Credibility: "Inc." / "LLC" signals stability to vendors, clients, banks.

Choice depends on liability exposure, tax goals, funding needs, and exit strategy. Consult CPA + attorney.