Is A Business Entity A Leagal Form Of A Business?

A business entity is the legal form of a business. Each of the major business entity choices available under U.S. law has advantages and disadvantages, including liability for business obligations, impact on taxes, required formalities, flexibility, cost of forming and operating the business, and more.

The choice of which entity to use is often driven by tax considerations as the entity classification that a business chooses may significantly affect its tax treatment under federal, state, local, and (in some cases) foreign laws. Therefore, it is crucial to understand the tax treatment of each entity in which a business may operate. But no single form of business entity is ideal for all businesses in all situations and the tax treatment should not be the sole factor considered in choosing the best entity for a particular business.