There are many types of business entities in the United States for two reasons. First, there is no federal registration. Each state authorizes legal entities by statute and common law.
Second, a complex tax code creates a level of variation for most types of legal entities. For example “C Corporations” and “S Corporations” are both corporations under state law, but each takes advantage of different subchapters of the tax code.
These tables summarize the various business entities and key terms for each.
|Limited Liability Company||Members||Managers
The corporate form is flexible. These are five of the more common type of corporations from a tax code perspective.
|Type of Corporation||Liability Protection||Tax Status|
|S Corporation||Entity||Pass through|
Non-Profits are typically organized under 501(c)(3) of the Internal Revenue Code for tax purposes. There are many other types of non-profit tax registrations.
The Professional Corporation designation is not a product of the tax code. It is a create of state law. Not all states authorize Professional Corporations.
Limited liability companies are products of state law. Most states have adopted a form of the Uniform Limited Liability Company Act.
|Type of LLC||Liability Protection||Tax Status||Owner-Manager Separation|
|Member Managed||Entity||Pass through||Combined|
|Manager Managed||Entity||Pass through||Separate|
|Professional LLC||Limited||Pass through||Varies|
The LLC is also a flexible legal form. Smaller LLCs often use the Member Managed form where the members also run the business as officers. Manager Managed LLCs separate oversight by owners (members) and operations (managers).
LLCs can also opt to be taxed like a corporation with entity level taxation, but this is not typical.
Many LLCs adoption the nomenclature of corporations, such as a Board of Directors and officers.
Some states authorize a master LLC form called a Series LLCs.
Generally (pun intended), partnerships are unincorporated business entities. There are several forms of partnership governed both by common law and statue.
|Type of Partnership||Abbreviation||Liability|
|General Partnership||GP||All Partners|
|Limited Partnership||LP||Only General Partner|
|Limited Liability Partnership||LLP||Limited, like LLC|
|Limited Liability Limited Partnership||LLLP||General Partner has limited liability|
The LLLP (or “triple LP”) is much less common than other forms of partnership. Partnerships benefit from pass through tax status.
For a detailed discussion of business entities see our analysis of 30 years of data about business entity incorporation.