Watch as Orlando, FL business attorney Jim Flick discusses the different types of business entities and the advantages and disadvantages of each. He states that when it comes to business planning, the main choices are corporations, partnerships—either general or limited—and limited liability companies (LLCs). Each entity type offers distinct tax advantages and liability protections.

Corporations are considered the “gold standard” due to their long-standing structure. By placing business activities within a corporation, personal liability is generally shielded; any risks or losses are encapsulated within the corporate entity. Corporations may be taxed separately as C corporations, which is beneficial if the business plans to eventually go public, or they can elect S corporation status, allowing income to flow directly to the owners to avoid double taxation.

General partnerships are less commonly used today because each partner is personally liable for the partnership’s obligations. Limited partnerships, however, allow some partners to act as investors or passive participants without incurring personal liability. Profits in a limited partnership pass through to the partners, who report the income individually for tax purposes.

LLCs, which emerged in the early 1980s, combine benefits of corporations and partnerships. They protect owners from business liabilities and offer charge order protection, which prevents personal creditors from seizing the business. For tax purposes, LLCs are flexible: they can elect to be taxed as a partnership, an S corporation, or, in some cases, may not be recognized as a separate entity at all. This flexibility makes LLCs a versatile option for business owners seeking both liability protection and tax efficiency.