Resolving Your Legal Issue Is Our Priority

  1. Home
  2.  » 
  3. Business And Corporate Law
  4.  » Choosing a type of business entity

Choosing a type of business entity

On Behalf of | Jan 27, 2022 | Business And Corporate Law

If you’re an aspiring entrepreneur living in Missouri, you may benefit from learning more about choosing between the different types of business entities. The most common are sole proprietorships, partnerships, corporations and limited liability companies.

Sole proprietorships and partnerships

A sole proprietorship involves an individual owning an unincorporated business alone. The business is not treated as a separate entity from the owner, so the business assets and liabilities are not separate from the owner’s personal assets and liabilities. The owner may be held personally responsible for the debts and obligations associated with the business. A partnership is the simplest structure for two people to own a business together and designate how much liability each partner shares.


A C corporation is a legal business entity that is separate from the owners. This corporate entity generates profits, gets taxed and may be held legally liable. This entity offers owners the strongest protection from personal liability, but it costs much more to form and maintain. This is the only entity that pays income taxes on profits. Under IRS corporate law, an S corporation entity is designed to avoid the double taxation of C corps.

Limited liability company

The limited liability company entity, or LLC, offers a mix of advantages available in partnerships and corporations. The LLC protects ownership’s personal liability and personal assets like bank accounts, a house or a vehicle. The profits and losses are passed through to the owner’s personal income with no corporate tax liability. However, owners of an LLC are considered to be self-employed and are required to provide self-employment tax contributions for Social Security and Medicaid.

The structure of the business entity affects daily operations, taxes liability, personal liability and limitations on ownership. You will need to decide which entity to form before you register the business with the state.