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Sole Proprietorship A sole proprietorship is the simplest form of business, in which a sole owner and his or her business are not legally distinct entities, and the owner is personally liable for business debts. General Partnership A general partnership is a partnership in which there are no limited partners, and each partner has both managerial power and unlimited liability for partnership debts. Limited Partnership A limited partnership is a partnership that has both limited and general partners. The general partners manage the business and are individually liable for the debts of the partnership. Each limited partners liability is limited to the amount of money that he or she has invested in the company. S Corporation An S corporation is an eligible corporation that elects to be taxed under Subchapter S of the Internal Revenue Code. An S corporation is generally exempt from most federal income tax; instead, the corporations shareholders pay tax on the corporation's income by reporting their pro rata shares of pass-through items on their own individual income tax returns. Corporation A corporation is an organization authorized by state law to act as a legal entity distinct from its owners. A corporation has its own name and powers to achieve legal purposes, and therefore is a separate legal entity. Limited Liability Company (LLC) The LLC is a hybrid between a corporation and a limited partnership. LLCs provide protection from personal liability, just as corporations do, yet LLCs receive the tax treatment of limited partnerships, or a C corporation, whichever the members of the LLC desire. Learn More