The four major business formation types are Sole proprietorship, partnership, “S” corporation, and “C” corporation.  (Associates, 1999-2010) A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts. Every asset of the business is owned by the proprietor and all debts of the business are the proprietor’s. This means that the owner has no less liability than if they were acting as an individual instead of as a business. (Wikipedia, 2012)

A partnership is a strategic alliance or relationship between two or more people.  Successful partnerships are often based on trust, equality, and mutual understanding and obligations.  Partnerships can be formal, where each party’s roles and obligations are spelled out in a written agreement, or informal, where the roles and obligations are assumed or agreed to verbally.  You may be able to choose your partner or, as is often the case, your partner may be assigned to you. Partners are often necessary when working in a foreign country, not only to bridge language barriers, but also to help you perform your work efficiently without falling into the traditional cross-cultural traps one encounters in a foreign setting.  (What is partnership)

An S corporation is a special structure of business ownership by which the business is able to avoid double taxation because it is not required to pay corporate income tax on the profits of the company. All profits/losses are passed on directly to the shareholders of the company. The shareholders file individual tax returns and pay income tax on whatever share of profits they receive from the business. If the business has more than one shareholder the business must file an informational tax return to provide details of the corporate income of each shareholder. (Contributer, 2012)

A business can be set up in a variety of ways, ranging from a sole-proprietorship to a general partnership, an LLC to a corporation. Corporations are remarkably different from other forms of businesses in the sense that it is an independent legal entity that is separate from the people who own, control and manage it. Due to this recognition as an individual entity, it is viewed as a legal “person” in the view of tax laws, and can thus be engaged in business and contracts, can initiate lawsuits and it be sued. It also must pay taxes.  A C corporation is a business term that is used to distinguish this type of entity from others. (Contributor, 2012)