Topic: Types of Business Entities

From a Business Law Attorney: What Are the Different Types of Business Entities?

Are you looking to start a business or change your business designation? You’ve come to the right place. Business owners have a long list of entities to choose from depending on the business type.

Here, we will explain all the details about the different types of business entities to help you determine which one to choose for your unique situation.

If you have any business questions after reading our blog, feel free to reach out to our business law attorney team. We are eager to hear from you.

From a Business Law Attorney: Types of Business Entities

There are multiple business entities, including sole proprietorships, partnerships, limited partnerships, C corporations, S corporations, and LLCs. Here at Clearwater Law Group, our business law attorneys work with them all.

Below is a brief overview of each type of business with advantages and disadvantages:

Sole Proprietorship

Operated by an individual, sole proprietorships are one of the most popular types of businesses to start. They are fast to set up, affordable, and often the easiest to handle for tax purposes. They are also unincorporated.

Who are sole proprietorships for?

  • Small business owners
  • Companies with a low risk of liability
  • Business owners without employees


  • Little legal documentation needed
  • Often fast and painless to file taxes
  • Relatively easy to run


  • Can lose your personal assets in the event of a lawsuit
  • Challenging to obtain loans from lenders


Sole proprietorships have a single owner, whereas partnerships are owned by at least two people. For the purpose of this section, we’re referring to general partnerships. This type of business is run by all of the partners, and similar to sole proprietorships, you don’t have to register this type of business on the state website.

Who are general partnerships for?

  • Small businesses with more than one owner
  • Partners looking to keep risk factors down


  • Simple to begin
  • Minimal risk
  • Limited paperwork
  • Don’t need to report the losses on your personal taxes, as the partners split up both the profits and losses
  • Often fast and painless to file taxes


  • Owners are responsible for the company’s debts, like a sole proprietorship.
  • Partner disagreements can affect business operations.
  • It can be challenging to fund the business via a loan.

Limited Partnership

Limited partnerships are the same as general partnerships in that they are owned by multiple partners. However, with this type of partnership, state paperwork is required. Limited partners may help fund the business operations. However, they do not have a say in the business operations. They also do not have as much liability as general partners.

Who are limited partnerships for?

  • Small businesses with silent partners
  • Partnerships with investors


  • There’s no personal liability for those who invest in the business as limited partners.
  • General partners direct the business operations without input from the limited partners.
  • Limited partners can exit the company at any point, and the business can still maintain operations.


  • General partners must cover any liabilities associated with the company.
  • They cost more than a general partnership.
  • Limited partners can become liable if they consistently participate in the day-to-day business operations.

C Corporation

C corporations are business entities with a board of directors, shareholders, and officers. Typically, all three parties contribute to the business decision-making. However, you can designate a single individual to be responsible for this.

Who are C corporations for?

  • Those looking to lower tax liability when expanding a company
  • Businesses with a high amount of liability


  • May be subject to a wide array of tax deductions
  • Fewer self-employment taxes
  • No personal tax liability for people who own the company
  • May provide stock


  • Cost more than other business types
  • Taxed twice
  • Not able to deduct the company’s losses on individual income tax returns
  • Multiple tax regulations and legal guidelines that must be met

Want to find out which business entity is right for you? Consult a business law attorney near me.

S Corporation

This type of business entity has limited liability, such as what you get with a C corporation, but it is considered a “pass-through entity” where taxes are concerned. In other words, the business’s earnings and losses will go on your individual income tax return.

Who are S corporations for?

  • High-revenue businesses with the building blocks for a corporation
  • Companies that want tax simplicity, such as what you’d get with a sole proprietorship


  • Zero corporate tax
  • Won’t be taxed twice
  • No personal liability for the company


  • Cost more to form than sole proprietorships and partnerships
  • Stock restrictions
  • Must abide by corporate standards, develop bylaws, and keep up with meetings for legal purposes


An LLC (limited liability company) is one of the most widely used business types. Why? As the name suggests, it minimizes your liability and comes with much less paperwork than other types of businesses. In general, they operate similar to a sole proprietorship.

Who are LLCs for?

  • Businesses that want to keep liability down
  • Startups
  • Freelancers
  • Businesses with employees


  • No personal tax liability
  • Limited corporate paperwork required
  • Relatively simple to operate


  • Must complete a state registration
  • Higher investment than a sole proprietorship

How a Business Law Attorney Can Help

If you’re thinking about establishing a new business or transitioning owners, our business law attorneys are here for you. We can assist with business entity formations, management, transitions, dissolutions, windups, terminations, business transactions, and even owner disputes.

Our business lawyers are there to help with step one of your business and every step after, including licensing, writing contracts and employee handbooks, as well as multiple other components needed to open and run a business in Washington State. We also work with several business entities, giving you peace of mind that we know what we’re doing.

Not sure which type of business is right for you or what to do next? Our expert legal team can walk you through the steps and help you navigate the legal side of your business, taking the stress off your plate by clearing up the uncertainties.

Need a qualified business law attorney? Clearwater Law Group has a long list of experienced lawyers who work with everything from sole proprietorships to C corporations. Schedule a consultation with our team today.