Business entities consist primarily of corporations and limited liability companies. They are called “Business Entities” because they represent separate legal formations and provide some legal protection of owners’ personal assets. What this means is that they have been officially established as a reportable unit for taxation as well as for other purposes, and that they maintain title to their own assets and are responsible for their own obligations.
Making the right choice of entity is important. The proper fit for an enterprise depends on a number of factors.
Why do we promote the formation of business entities in particular? The successful formation and operation of a business entity has directly to do with the notion that individuals should be given the opportunity to put forth an idea, to develop a plan, to create a product, or to provide a service, and to be able to do so in a way that frees up needed capital. That helps insure that the operation will be properly financed. Maybe more importantly, it has to do with the idea that there is something that can provide assistance in reducing risk. Reducing risk helps protect assets that represent available financial resources, not just for today, but also into the future.