What is a Business Entity?

A business entity is a legal structure that is used to organize and operate a business. It is important to choose the right business entity for your business, as this will have a significant impact on your taxes, liability, and other legal matters.

There are many different types of business entities, including sole businesslogosonline partnerships, corporations, limited liability companies (LLCs), and S corporations. Each type of entity has its own advantages and disadvantages, so it is important to consult with an attorney to choose the right one for your business.

The Business Entity Concept

The business entity concept is a legal principle that treats a business as a separate entity from its owners. This means that the business’s assets and liabilities are separate from the owners’ personal assets and liabilities. This can be important in protecting the owners from personal liability in the event of a lawsuit or financial difficulty.

Articles of Organization

The articles of organization are a legal document that is filed with the state to form a business entity. The articles of organization typically include information about the business’s name, purpose, location, and ownership structure. The specific requirements for articles of organization vary from state to state, so it is important to consult with an attorney to ensure that your articles are properly drafted.

Choosing the Right Business Entity

The right business entity for your business will depend on a number of factors, including the size of your business, the number of owners, the amount of liability protection you need, and your tax situation. Some of the factors to consider when choosing a business entity include:

  • Taxes: The different types of business entities have different tax implications. For example, corporations are taxed on their profits, while LLCs can choose to be taxed as a corporation, a partnership, or a sole proprietorship.
  • Liability protection: The different types of business entities offer different levels of liability protection for their owners. For example, corporations offer the most liability protection, while sole proprietorships offer the least.
  • Ownership structure: The different types of  business entities have  different ownership structures. For example, corporations can have multiple shareholders, while LLCs can have one or more members.
  • Ease of formation and operation: The different types of business entities have different ease of formation and operation. For example, sole proprietorships are the easiest to form and operate, while corporations are the most complex.


Choosing the right business entity is an important decision that should be made carefully. There are many factors to consider, and the best choice for your business will depend on your specific circumstances. If you are unsure which business entity is right for you, it is a good idea to consult with an attorney.