What are the different types of business entities?
The default rule is that if you are one person owning a business, you are a sole proprietor. You are liable for all the risks of the business, and receive all the profits. You pay taxes on your Schedule C of your own tax return, because your business is a pass through tax entity. If you are two or more people starting a business, the default rule is that you are a partnership. This is the most dangerous entity, because you are personally liable not just for the business, but for the actions of your other partners (even if they do things without your permission). You share profits with partners, as determined by your partnership agreement (if any). The partnership files a tax return and gives a K-1 to each partner, and taxes are paid by each partner on their own tax returns. If your business is owned by one or more people, you can form a Limited Liability Company (LLC). This is a new form of business, where one or more people have limited liability for the actions of the business. The b
