Legal Definition & Jurisdiction: A sole proprietorship is an unincorporated business owned by a single individual, with no legal distinction between the owner and the business (investopedia.com, sba.gov). This is the simplest form of business and arises automatically in the U.S. when one person engages in business activity without forming another entity (sba.gov). Internationally, similar structures exist: for example, the UK’s sole trader model or Germany’s Einzelunternehmen are equivalent in that the business is just an extension of the owner, not a separate legal entity.

Ownership Model: Single owner with full control. The owner makes all decisions and is entitled to all profits (investopedia.com). No shares or partners are involved. (If additional owners join, the business by definition becomes a partnership or another entity type.)

Taxation Structure: Pass-through taxation – all business income or loss is reported on the owner’s personal tax return (investopedia.com). The proprietorship itself is not taxed separately; profits are treated as the owner’s personal income (investopedia.com). This avoids corporate income tax, meaning no double taxation. The owner typically files a Schedule C (Profit or Loss from Business) with their 1040 individual return (investopedia.com). In jurisdictions outside the U.S>, sole proprietors similarly pay personal income tax on business earnings.

Liability Exposure: Unlimited personal liability. Because the business has no separate legal identity, the owner is personally liable for all debts, obligations, and legal liabilities of the business (investopedia.com, sba.gov). Creditors can pursue the owner’s personal assets (home, savings, etc.) to satisfy business debts. This lack of liability protection is the major drawback of sole proprietorships (investopedia.com).

Key Pros and Cons: Pros: (1) Easy and low-cost to form – no formal incorporation required (investopedia.com). Simply start doing business (though local business licenses may be needed). (2) Complete control – the owner has full decision-making power (sba.gov). (3) Simplified taxes – one layer of tax, and no separate business tax filing in most cases (investopedia.com).
Cons: (1) Personal liability is unlimited, putting the owner’s assets at risk for business debts (investopedia.com). (2) Harder to raise capital – cannot sell stock or equity; banks may be hesitant to lend due to higher risk and lack of separate collateral (investopedia.com, sba.gov). (3) Business life is tied to the owner (the business lacks continuity beyond the owner).

Use Case Examples: Sole proprietorships are common for small, low-risk businesses or solo ventures – e.g. individual consultants, freelancers, independent contractors, small retail or service businesses. They are suitable when a single person wants to test a business idea or run a side business before committing to a formal entity (sba.gov). Many businesses start as sole props and later transition to an LLC or corporation as they grow (investopedia.com). Internationally, sole proprietorship/sole trader setups are the norm for local tradespeople, small shops, and single-person ventures due to their simplicity.

Legal Definition & Jurisdiction: A general partnership is an unincorporated business owned by two or more individuals (or entities) who co-manage the business and share in its profits and losses (investopedia.com). In a general partnership, all partners are general partners. This structure exists in similar form worldwide (e.g., simply “partnership” in common law countries; in Germany a rough equivalent is the Offene Handelsgesellschaft (OHG)). In most jurisdictions, a partnership can be formed by an oral or written agreement between partners (though a written partnership agreement is highly recommended).

Ownership Model: Two or more partners jointly own and operate the business. Each general partner typically has equal management rights (unless otherwise agreed) and acts as an agent of the partnership. Profits by default are shared equally, though a partnership agreement can allocate profits and losses in different ratios (investopedia.com). There is no shareholders’ equity; ownership is defined by the partnership agreement (which may specify capital contributions and percentage interests).

Taxation Structure: Pass-through taxation (in the U.S. and many other countries). The partnership itself files an information return but pays no income tax; instead, profits (or losses) flow through to the partners’ personal tax returns (investopedia.com). In the U.S., for example, partnerships file IRS Form 1065 and issue Schedule K-1 to partners who then report their share of income on their own returns. There is no double taxation.

Liability Exposure: Unlimited personal liability for each general partner. Every general partner is personally liable for all debts and obligations of the partnership, and even liable for business actions taken by other partners in the scope of partnership business (investopedia.com). This means creditors can go after any partner’s personal assets to satisfy partnership debts. Each general partner has joint and several liability, which is a major risk factor.

Key Pros and Cons: Pros: (1) Simple to form – often can be formed by a simple agreement; fewer formalities than a corporation (investopedia.com). (2) Combined resources and skills – multiple owners can contribute capital, expertise, and labor. (3) Pass-through taxation benefits – business income is taxed once at the partner level, and partnership losses can offset partners’ other income in many cases (investopedia.com).
Cons: (1) Personal liability is a significant downside – general partners have no liability protection at all (investopedia.com). (2) Potential for disputes – shared management can lead to conflicts if partners disagree; a detailed partnership agreement is crucial. (3) Limited growth potential – it can be harder to raise large amounts of capital since you cannot issue stock, and adding partners can complicate decision-making. Partnerships often dissolve if a partner leaves or dies unless an agreement specifies continuation.

Use Case Examples: General partnerships often arise in small businesses with a handful of co-founders – for example, a family business or a professional practice started by two or three people (like a small law firm or medical office before they formalize). They’re also common for short-term ventures or where partners want to “test the waters” of a business idea together (sba.gov). Many professional services firms (law, accounting) began historically as general partnerships (though today they often use LLP or LLC forms for liability protection).

Legal Definition & Jurisdiction: A limited partnership is a partnership with two classes of partners: at least one general partner and one or more limited partners. It is a formal structure created under state (or country) law, usually by filing a certificate of limited partnership. The general partner (GP) manages the business and bears unlimited liability, while limited partners (sometimes called “silent partners”) contribute capital and share profits but have limited liability (investopedia.com, sba.gov). This form exists in many countries: e.g., the UK has Limited Partnerships, Germany has Kommanditgesellschaft (KG) which functions similarly (the Komplementär is the GP and Kommanditisten are limited partners).

Ownership Model: Hybrid ownership – the general partner(s) typically hold a controlling stake and management power, whereas limited partners are passive investors. Limited partners often have no role in daily management (if they do participate too much, they risk losing liability protection). The partnership agreement defines each partner’s contribution and share of profits. Limited partners usually invest capital and expect a return, while the GP may invest a smaller amount but contribute expertise and management.

Taxation Structure: Pass-through taxation (in the U.S.), similar to general partnerships. Profits and losses pass through to both general and limited partners according to their share. The partnership doesn’t pay income tax itself. (For example, a U.S. LP files a Form 1065 and issues K-1s to all partners.) Many jurisdictions treat limited partnerships as pass-through entities for tax, though some countries might tax the GP’s share differently if the GP is a corporation. Generally, limited partners can claim their share of losses (with some restrictions) and are taxed on their share of income annually.

Liability Exposure: Mixed – General partners have unlimited liability, as in a general partnership, but limited partners enjoy limited liability (liable only up to the capital they invested) (investopedia.com, sba.gov). This means a limited partner’s personal assets are not at risk beyond their investment, provided they do not take an active management role. The general partner typically carries all the personal risk. (Because of this, in practice many LPs have a corporation or LLC serve as the general partner to shield individuals from liability.)

Key Pros and Cons: Pros: (1) Ability to raise capital from passive investors – the limited partner structure is attractive to investors who want profits without day-to-day involvement and without unlimited liability. This makes LPs useful for funding projects (e.g. real estate developments, film productions, investment funds). (2) Pass-through taxation – avoids double taxation; profits go directly to partners. (3) General partner retains control – the GP can make decisions without interference from numerous investors, unlike a corporation where shareholders have voting rights.
Cons: (1) Unlimited liability for the GP – someone still must bear full risk. As noted, this is often mitigated by making the GP a limited liability entity, but if an individual is GP, they carry the risk. (2) Complex formation and compliance – LPs usually require a formal filing and adherence to state laws, and a well-drafted partnership agreement. They have slightly more administrative overhead than a general partnership. (3) Limited partners have no management say – which could be a drawback for some contributors; also if a limited partner does step into management, they could jeopardize their liability shield. (4) Transfer of interests can be restricted – many partnership agreements limit how limited partners can sell or transfer their shares, affecting liquidity.

Use Case Examples: Limited partnerships are common in investment and finance (for example, private equity funds and venture capital funds are often structured as LPs, with the fund managers as GPs and the investors as limited partners). They’re also seen in real estate projects (a developer might be GP and investors LPs) and sometimes in estate planning (family limited partnerships). In some countries, professional firms used LPs before LLPs were available. The structure is effective whenever a business needs passive capital: the limited partners invest money but want to limit risk, and they trust the general partner to manage the enterprise.

Legal Definition & Jurisdiction: An LLP is a partnership in which all partners have some degree of limited liability. In an LLP, no partner is liable for the negligence or misconduct of another partner (sba.gov). Many jurisdictions restrict LLPs to professional services firms (law, accounting, consulting). In the UK, an LLP is a separate legal entity; in many U.S. states, LLP is a status a general partnership can elect.

Ownership Model: Multiple partners, usually all eligible to participate actively in management. There is rarely a GP/LP split. Profit-sharing and management rights are defined by the LLP agreement, often mirroring seniority or contribution.

Taxation Structure: In the U.S. and UK, LLPs are usually taxed as partnerships – pass-through taxation. The LLP itself is not taxed on income; partners report their share on personal returns, avoiding double tax.

Liability Exposure: Partners are generally protected from personal liability for partnership obligations and from malpractice of other partners (sba.gov). They remain liable for their own negligence or misconduct. Some jurisdictions provide a “full shield” (no liability for firm debts); others provide a “partial shield”.

Key Pros and Cons: Pros: (1) Liability protection for all partners against each other’s mistakes (investopedia.com). (2) Pass-through taxation. (3) Flexible internal management. (4) Good professional branding.
Cons: (1) Not available to all business types in some jurisdictions. (2) Requires registration and ongoing compliance. (3) Possible partner conflict where everyone can be involved in management. (4) Multi-state tax filings can get complex.

Use Case Examples: Large law firms, accounting firms, architectural practices, consulting shops. Also used by some multi-owner professional practices that want partnership culture with liability protection.

An LLC separates personal assets from business debts: business creditors cannot normally reach the owner’s house, car, or savings. (investopedia.com, sba.gov)

Legal Definition & Jurisdiction: A Limited Liability Company (LLC) is a hybrid business structure that provides owners (“members”) with limited personal liability like a corporation, while allowing management and pass-through taxation flexibility like a partnership (investopedia.com). LLCs are U.S.-specific in name but equivalents exist globally: UK Private Limited Company (Ltd), German GmbH, French SARL, etc. (en.wikipedia.org). All are separate legal entities; owners are liable only up to their investment (en.wikipedia.org).

Ownership Model: Extremely flexible. An LLC can have a single member or many members (individuals, corporations, foreign owners, etc.) (investopedia.com). Ownership is expressed as membership interests or units, not stock. Member-managed vs. manager-managed models allow hands-on or delegated control. International equivalents use shares and directors but still keep ownership closely held.

Taxation Structure: U.S. default: pass-through. A single-member LLC is “disregarded” and reported on the owner’s return; multi-member LLCs are taxed like partnerships (investopedia.com, sba.gov). LLCs can elect C Corp or S Corp tax treatment if beneficial (investopedia.com). International equivalents (Ltd, GmbH, SARL) are usually taxed as corporations by default, not pass-through.

Liability Exposure: Strong limited liability. Members are not personally liable for LLC debts beyond their investment (investopedia.com, sba.gov). Personal guarantees and personal misconduct still create personal liability. Courts can “pierce the veil” in cases of fraud or abuse (investopedia.com).

Key Pros and Cons: Pros: (1) Strong liability protection (investopedia.com). (2) Pass-through taxation by default in the U.S. (3) Flexible management and operations via operating agreement. (4) Flexible profit allocations. (5) No ownership restrictions (unlike S Corps).
Cons: (1) U.S. members often pay self-employment tax on their share (sba.gov). (2) LLC rules and fees vary by state/country. (3) Some investors prefer C Corp stock. (4) Ongoing compliance (articles, registered agent, annual reports). (5) Outside the U.S., “LLC” can be misunderstood; local equivalents are usually taxed as corporations (en.wikipedia.org).

Use Case Examples: Default choice for many U.S. small and mid-size businesses: local retail, restaurants, consultants, agencies, real estate holding companies, family businesses, and professional practices (LLC/PLLC). Internationally, private companies (Ltd, GmbH, SARL) are the standard “limited liability container” for operating businesses.

Legal Definition & Context: An S Corporation is not a separate type of state-created entity; it’s a federal tax status. Qualifying corporations (or LLCs taxed as corps) can elect S status so income passes through to shareholders (investopedia.com). Incorporate first, then file IRS Form 2553 to elect. Only U.S. entities can be S Corps.

Ownership Model: S Corps are limited to 100 shareholders, all of whom must be U.S. citizens or residents (no foreign owners allowed), and only one class of stock is permitted (investopedia.com). This means S corps typically have a relatively small, stable ownership group. Often these are owner-operated businesses or family businesses. Shareholders can be individuals, certain trusts, or estates – but not corporations, partnerships, or many types of entities (investopedia.com). These restrictions are designed to keep S Corps closely held. Within those limits, ownership works like a normal corporation: shareholders hold stock, elect a board, and so on.

Taxation Structure: S Corps generally pay no federal income tax at the entity level. Profits and losses flow through to shareholders per their ownership percentage (investopedia.com). They file Form 1120S as an informational return. Some states impose entity-level taxes (investopedia.com). Shareholder-employees pay employment tax only on wages, not on all profit; distributions are not subject to FICA if salary is “reasonable” (irs.gov).

Liability Exposure: Same limited liability as a standard corporation: shareholders risk only their investment (investopedia.com). Officers/directors have usual corporate duties and liabilities, but S status only impacts tax, not legal liability.

Key Pros and Cons: Pros: (1) No federal corporate tax on profits (investopedia.com). (2) Limited liability and a familiar corporate structure. (3) Potential self-employment tax savings by splitting salary vs. distributions (irs.gov). (4) Pass-through of losses in early years. (5) Easier share transfer compared to partnerships.
Cons: (1) 100-shareholder cap, no foreign shareholders, limited eligible owners (investopedia.com). (2) Only one class of stock allowed. (3) U.S.-centric – not recognized abroad. (4) Must follow corporate formalities: bylaws, meetings, minutes. (5) IRS scrutiny over “reasonable compensation”.

Use Case Examples: U.S. small and mid-sized owner-operated businesses, professional practices, and solo-entrepreneur corporations that want tax efficiency while staying domestic. Not suited for VC-backed, multi-class, or foreign-investor-heavy structures.

Legal Definition & Jurisdiction: A C Corporation is a standard corporation: a separate legal entity taxed under corporate rules (Subchapter C in the U.S.). Globally, PLC (UK), AG (Germany), SA (France), and many Ltd/GmbH structures function as corporate forms. They can own property, sue, be sued, and continue independent of shareholders (investopedia.com).

Ownership Model: Shareholders own stock. There is no limit on shareholder count in a C Corp. Ownership can be widely dispersed (public) or tightly held (private). Shareholders elect a board, which appoints officers to run the company (investopedia.com, sba.gov).

Taxation Structure: C Corps file their own corporate tax returns (e.g., Form 1120 in the U.S.) and pay corporate income tax (investopedia.com). Dividends paid out are taxed again at the shareholder level – the classic “double taxation” (investopedia.com). Retained earnings are only taxed at the corporate level. Many countries use similar corporate tax plus dividend tax systems.

Liability Exposure: Shareholders, directors, and officers enjoy limited liability – owners risk only the value of their shares (investopedia.com, sba.gov). Corporations generally provide the strongest liability shield under U.S. law (sba.gov).

Key Pros and Cons: Pros: (1) Strong limited liability. (2) Unlimited growth potential – can issue multiple share classes, attract venture capital, and go public (sba.gov). (3) Perpetual existence. (4) Highly transferable ownership. (5) Potential tax advantages around employee benefits, retained earnings, and qualified small business stock.
Cons: (1) Double taxation of profits (investopedia.com). (2) Higher formation and compliance costs (sba.gov). (3) Heavy regulatory burden for larger and especially public corporations. (4) Governance complexity and potential principal–agent problems. (5) Shareholders cannot generally deduct corporate losses on personal returns.

Use Case Examples: Venture-backed startups, high-growth tech companies, large multinationals, and any business planning to raise institutional capital or go public. Globally, the default structure for big business.

Legal Definition & Jurisdiction: A nonprofit organization (often structured as a nonprofit corporation) is an entity organized not to generate profit for owners, but to fulfill a charitable, educational, religious, scientific or social purpose. Nonprofits (in the U.S. often called 501(c)(3) organizations referring to the IRS code section) are eligible for tax-exempt status if they meet strict criteria (investopedia.com). Legally, a nonprofit corporation is formed under state law (much like a C Corp) but its charter and operating rules commit it to a mission that benefits the public or a specific group, and it cannot distribute profits to private individuals. Internationally, most countries have comparable forms: e.g., in the UK a Charitable Incorporated Organisation (CIO) or a Company Limited by Guarantee can serve nonprofit purposes, and in France an association under 1901 law or a Fondation serves similar roles.

Ownership Model: No equity ownership – governed by members or trustees. Nonprofits do not have shareholders like a for-profit corporation. Instead, they may have a board of directors or trustees who oversee the organization. Some nonprofits have a membership structure where members (who could be donors or participants) have voting rights to elect the board, while others are non-membership and the board is self-perpetuating. The people who found or run a nonprofit do not own it; they act as stewards. If the nonprofit dissolves, its assets must generally be transferred to another nonprofit or public agency, not to individuals. This lack of private ownership is a defining characteristic – you can’t sell a nonprofit or take profits from it (beyond reasonable salaries).

Taxation Structure: Tax-exempt (for approved purposes) and donations often tax-deductible. In the U.S., once a nonprofit corporation obtains 501(c)(3) status, it is exempt from federal (and often state) income taxes on income related to its exempt purposes (investopedia.com). Donations made by individuals or companies to the nonprofit are typically tax-deductible for the donor (investopedia.com). Nonprofits may still pay taxes on income not related to their mission (known as unrelated business income) and they must pay payroll taxes for their employees like any employer. They also are generally exempt from property taxes and sales taxes in many jurisdictions for mission-related purchases.

Liability Exposure: Limited liability (with nonprofit specifics). Nonprofit corporations provide the same liability protection as for-profit corporations to their directors, officers, and members. Those individuals are not personally liable for the debts of the nonprofit just by virtue of their role (investopedia.com). So if a charity incurs debt it can’t pay, board members are not required to cover it from personal funds (absent wrongdoing). Volunteers and donors likewise are not liable. However, if a director or officer commits negligence or fraud (for example, mismanages funds knowingly), they can be held personally responsible to the organization or even legally (and nonprofits typically carry liability insurance for their board).

Key Pros and Cons: Pros: (1) Tax-exempt status – not having to pay income tax on donations, grants, and mission-related income means more resources can go toward the mission (investopedia.com). It also enables tax-deductible donations, which incentivizes individuals and companies to donate (they can reduce their taxable income via charitable contributions) (investopedia.com). (2) Limited liability – the individuals involved (founders, board, staff) are protected from legal claims against the nonprofit (investopedia.com), barring misconduct. (3) Access to grants and contributions – only nonprofits are eligible for many private and government grants. Also, they can fundraise from the public; people are more willing to give to an entity that exists solely for a cause (and with donation incentives). (4) Perpetual existence and public trust – a well-established nonprofit can last for generations, building a brand of trust that attracts support. (5) Certain postal and other discounts – e.g., U.S. nonprofits get discounted postal rates, and other benefits like property tax waivers, etc., depending on local laws.
Cons: (1) No profits to owners (by design) – founders and contributors cannot take profits out. (2) Regulation and compliance burden – to maintain tax-exempt status, nonprofits must adhere to numerous regulations and extensive reporting. (3) Operational constraints – nonprofits often rely on volunteer boards and may have decision-making spread among stakeholders. (4) Public scrutiny and transparency – finances are usually open to public inspection. (5) Difficulty attracting capital and talent in some cases.

Use Case Examples: Nonprofits are appropriate for charitable, educational, cultural, religious, or membership-based organizations where the primary goal is to serve a public or member benefit rather than make money. Classic examples: charities like the Red Cross or Oxfam, educational entities like private schools or universities, hospitals (many hospitals and healthcare systems are nonprofit), religious institutions, arts organizations, social clubs, public advocacy groups, foundations and trusts that grant money for causes, etc.

Legal Definition & Jurisdiction: A cooperative is a business entity owned and democratically controlled by its members – those who use its services or are engaged in its economic activities. The cooperative operates for the mutual benefit of its member-owners, rather than to maximize profits for external shareholders (sba.gov). Cooperatives can be incorporated (and often are) under specific cooperative laws or under general corporation laws with a cooperative designation. Globally, co-ops are recognized in many forms.

Ownership Model: Member-owned, democratically controlled. Each member typically has one vote regardless of investment (sba.gov). Profits (surplus) are distributed to members as patronage dividends or rebates, usually proportionate to their participation rather than capital invested.

Taxation Structure: Many cooperatives in the U.S. are taxed under Subchapter T, which allows deduction of patronage dividends distributed to members (toryburchfoundation.org). Members then report those amounts. Some co-ops, such as credit unions, may be exempt from income tax entirely (mercatus.org).

Liability Exposure: If the cooperative is incorporated, members generally have limited liability similar to corporate shareholders; they risk only their investment unless they personally guarantee obligations.

Key Pros and Cons: Pros: (1) Member benefit and empowerment (usda.gov). (2) Democratic control (sba.gov). (3) Limited liability. (4) Economies of scale for members (toryburchfoundation.org). (5) Community rooted and often resilient.
Cons: (1) Capital raising challenges (toryburchfoundation.org). (2) Decision-making can be slower. (3) Management and governance complexity. (4) Member equity often illiquid. (5) Legal and accounting complexity in some jurisdictions.

Use Case Examples: Agricultural co-ops, retail co-ops (like REI), credit unions, rural utility co-ops, housing co-ops, worker co-ops in services and manufacturing.

Business structure terminology varies around the world, but there are broad parallels that can be drawn between U.S. entities and those in other jurisdictions:

Sources: en.wikipedia.org, justpayrollservices.co.uk and country-specific company law references.

When expanding globally, leaders should map U.S. structures to the local equivalents. Example: a U.S. LLC setting up in the UK will likely form a Private Limited Company (Ltd); a U.S. nonprofit may set up a local charity or company limited by guarantee.