Business structures come in so many types that business owners can easily get confused. Here’s a quick guide that will hopefully shed a little light on business entities for you.

“C” Corporation: A corporation whose shares are held by shareholders. The entity stands apart from the shareholders for legal and tax purposes. The shares of the corporation may be “taken public” and traded on stock markets.

Foreign Corporation: A corporation doing business in a jurisdiction beyond where it was formed. Microsoft is a Washington corporation. When it does business in New York, it is considered a “foreign corporation.”

General Partnership: A business effort involving two or more people known as partners. Each partner is liable for all partnership debts and obligations regardless of participation and contribution amounts.  A general partnership provides no protection against lawsuits.

Holding Company: Part of a double incorporation strategy. The sole purpose of a holding company is to own or control other companies. The other companies typically are exposed to significant liability threats. For instance, many insurance companies use holding companies to take profits and limit lawsuit risks.

Joint Venture: A cooperative business effort between two or more parties. It is usually limited to a single business purpose and involves a sharing of responsibilities and revenues. For instance, a database programmer and web site designer might enter a joint venture to provide e-commerce solutions to businesses.

LLC – Limited Liability Company: A creation of state law in which one or more individuals form an entity providing the liability protection of a corporation but the tax benefits of a partnership.

Limited Partnership: A partnership in which the business is managed by a general partner with limited partners supplying capital investment. The limited partners are prohibited from actively participating in the management of the partnership. In exchange, the limited partner’s liability is limited to the amount of their investment. In pursuing this business entity, the general partner is almost always a corporation.

S Corporation: Similar to a C corporation, this entity provides solid asset protection for shareholders from business liabilities and debts. The primary difference is the entity can be taxed as a pass through entity and is limited to 75 shareholders.

Sole Proprietorship: A business owned and controlled by one person. The designation provides no protection from business liabilities. It is taxed on the person’s personal tax returns on schedule C.

Each of the above entities provides certain advantages to a business owner. You should be able to get an idea of which one is best for you.