Business Entity Classification

Business entity classification refers to how a company is legally organized and recognized for tax and legal purposes. Common types include sole proprietorships, partnerships, Limited Liability Companies (LLCs), and corporations. Each classification affects how the business is taxed, its liability, and regulatory requirements. For example, sole proprietors face personal liability, while corporations offer limited liability. Proper classification helps ensure compliance with laws and optimizes tax benefits. Understanding your business's classification is essential for legal, financial, and operational planning.