Business Structures

Concept

Entity Types

Sole Proprietorship: simplest, no legal separation, unlimited personal liability. General Partnership: two or more owners share profits and unlimited liability. LLC: limited liability + pass-through taxation (flexible). S Corporation: limited liability, pass-through tax, max 100 shareholders. C Corporation: separate legal entity, double taxation (entity + dividends).

Example

Limited Liability

In an LLC or corporation, owners are generally NOT personally liable for business debts. Their risk is limited to their investment. In a general partnership, EACH partner is jointly and severally liable for ALL partnership debts.

Key Point

Pass-Through vs. Double Taxation

Pass-through entities (partnerships, S corps, LLCs) are not taxed at the entity level — income flows to owners' personal returns. C corporations face double taxation: the entity pays corporate tax, then shareholders pay tax on dividends.

Agency Law

UCC Article 2: Sale of Goods

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Practice questions from this module to reinforce what you learned.

Practice Questions