10 Most Common Types of Businesses in 2025

Key Takeaways

1. Different structures: There are 10 common business types, each with unique benefits and risks.
2. Liability varies: LLCs and corporations protect owners’ personal assets; sole proprietorships and partnerships do not.
3. Taxation differs: Some structures have pass‑through taxes, others are taxed at the corporate level.
4. Growth potential: Corporations and benefit corporations suit businesses seeking investors and long‑term growth.
5. Choose wisely: The best structure depends on your goals, risk tolerance, and long‑term plans.

Business ownership exists in various forms, and it’s important to determine the legal structure and regulations of your future company before its creation and operation. Choosing the appropriate business type extends beyond administrative considerations; it represents the activity of your enterprise, influences your financial liability and taxation, and defines funding and investment opportunities. This comprehensive guide covers a list of basic types of businesses, empowering you to decide which structure best suits your enterprise. 

What Types of Businesses Are There?

To understand different types of business structures, let’s review their classification. Businesses commonly fall into the following categories:

• sole proprietorship;
• limited liability company;
• C corporation;
• S corporation;
• benefit corporation;
• limited partnership;
• general partnership;
• limited liability partnership;
• cooperative;
• nonprofit organization.

Choosing the most suitable structure depends on various factors, including whether you act alone or with partners, your profit objectives, the necessity of issuing shares, and the insurance and licenses relevant to your company. Let’s delve into the key features of each type. 

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Sole Proprietorship 

As the name states, sole proprietorship is owned and operated by a single person. This business type is easy to open and doesn’t require any special filings and registrations, making it a popular choice for people selling products and services independently, such as online businesses. Owners are responsible for legal and tax liabilities and maintain complete control over their company. They report business income on their personal tax returns. However, the downside is that this business structure has the lowest level of legal and financial protection. In hard times, the owner’s personal assets may be used to cover company debts. 

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Limited Liability Company (LLC)

A limited liability company combines the features of a partnership and a corporation, making it an appealing choice for small businesses and startups. This business structure offers personal liability protection for LLC members, shielding them from company debts. Besides, LLCs come with tax flexibility, allowing owners to choose between different tax treatments. Despite these advantages, the registration process of this business structure can be somewhat complex.

C Corporation

C corporation is an ideal business structure for companies with multiple employees. It is created by shareholders who are not personally liable for the company’s legal disputes, offering the most powerful personal liability protection. Its owners receive profits that are taxed individually but have to pay corporate income tax. Despite its numerous advantages, establishing a C corporation can be complex, involving the filing of specific documents with the state and obtaining appropriate licenses and permits.

S Corporation

Unlike C corporations, S corporations are business entities limited to a maximum of one hundred shareholders. You must be a U.S. citizen or a permanent resident to own this company type. Profits are taxed at the personal income level rather than at the corporate level, providing tax advantages. However, these formations have strict requirements for maintaining the corporate status and limits on fundraising.

Benefit Corporation

Benefit corporations have the same tax requirements as C corporations. However, they distinguish themselves by prioritizing a mission of positive influence on the environment and local communities, alongside the financial interests of shareholders. This business entity is required to publish an annual report assessing its environmental and social performance, using third-party standards for measurement. By promoting social good, these organizations attract investment and appeal to consumers and employees who value corporate responsibility.

General Partnership

A general partnership is a business structure owned by 2 or more people (partners) who share profits, responsibilities, and liability. Like a sole proprietorship, this company type is taxed at the individual partner level. Despite requiring extra paperwork, it has a lot of benefits, allowing partners to share resources, knowledge, and workload. However, it also means that partners are responsible for each other’s actions, and their personal assets can be used to repay company debts.

Limited Partnership (LP)

A limited partnership is a variation of a general partnership with both limited and general partners as owners. General partners have unlimited personal liability for the debts and obligations of the partnership, while limited partners, often investors, have limited liability and are not involved in the regular management and operations of the business. Limited partnerships offer pass-through taxation, where profits and losses pass through to individual partners, who report them on personal tax returns.

Limited Liability Partnership (LLP)

The structure of a limited liability partnership closely resembles that of a general partnership and offers pass-through taxation. The key difference lies in the separation between company and personal assets. LLPs can be owned by 2 or more partners who are liable for their personal conduct but not for other partners’ actions or company debts. However, not all business entities are eligible to be LLPs; this type is restricted to certain professions, such as accountants and lawyers.

Need help in finding the right business partner? Explore our comprehensive guide for valuable insights and tips.

Nonprofit Organization

Nonprofit organizations have a tax-exempt status since they are dedicated to advancing charitable and educational purposes for the public good. Any profit earned by these companies is kept and reinvested into their programs and expenses. As a result, owners don’t need to pay federal income tax. However, the registration process for these companies requires additional paperwork, including seeking recognition from the government as a tax-exempt entity. Besides, nonprofits are limited in the types of business activities they can pursue.

Cooperative (Co-op)

Unlike other business structures, a cooperative distributes its income exclusively between its cooperative members and doesn’t need to pay dividends to external stakeholders. It operates for the mutual benefit of its members who collectively influence the direction and operations of the cooperative. Establishing a co-op involves specific steps such as completing a membership application, creating bylaws, and appointing a board of directors.

Different Business Types FAQ

Check the top frequently asked questions to better understand definitions of company types and their peculiarities. Whether you’re starting a new venture or expanding an existing one, these insights will aid you in choosing the right business structure.

So, Which Type of Business Is Right for You? 

Each business structure has its own unique characteristics and benefits. Before registering a new company, it is crucial to compare all the pros and cons of each type and consider various factors such as your goals, business mission, taxation rules, presence of partners, company control opportunities, financial liability, and more. By assessing these factors and understanding the long-term needs of your business, you can choose which type to pursue. Additionally, as your company grows and evolves, you can start with one business ownership and later convert it to another type to better suit your changing needs.