Many businesses organize themselves around some sort of hierarchy or bureaucracy, where positions in a company have established roles and responsibilities. The most common structures include sole proprietorships, partnerships, corporations, and limited liability companies (LLC), with sole proprietorships being the most prevalent.
A sole proprietorship, as its name suggests, is a business owned and operated by a single natural person. There is no legal separation between the business and the owner; the tax and legal liabilities of the business are thus that of the owner.
A partnership is a business relationship between two or more people who join to conduct business. Each partner contributes resources and money to the business and shares in the profits and losses of the business. The shared profits and losses are recorded on each partner's tax return.
A corporation is a business in which a group of people acts together as a single entity; most commonly, owners of a corporation are shareholders who exchange consideration for the corporation's common stock. Incorporating a business releases owners of the financial liability of business obligations; however, a corporation has unfavorable taxation rules for the owners of the business.
For this reason, a relatively new (first available in Wyoming in 1977 and other states in the 1990s) business structure, a limited liability company (LLC), is available; this structure combines the pass-through taxation benefits of a partnership with the limited-liability benefits of a corporation.
Business sizes range from small owner-operated companies, such as family restaurants, to multinational conglomerates such as General Electric. Larger businesses may issue corporate stock to finance operations. In this case, the company is publicly traded and has reporting and operating restrictions. Alternatively, smaller businesses may operate more independently of regulators.
A company may describe its business by communicating the industry in which it operates. For example, the real estate business, advertising business, or mattress production business are industries in which a business can exist. Because the term “business” can be interchanged with day-to-day operations as well as the overall formation of a company, the term is often used to indicate transactions regarding an underlying product or service. For example, ExxonMobil transacts business by providing oil.