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Types of companies are the different legal structures a business can use, which decide who owns it, who is responsible for its debts, and how it pays taxes. In the United States, the main types are the sole proprietorship, partnership, limited liability company (LLC), C corporation, S corporation, nonprofit, and cooperative.
Choosing the right type matters because it affects your personal risk, your tax bill, and how easily you can raise money. This guide explains each type with real US examples, compares them in one table, and shows how to pick the right structure for a new business.
Key Takeaways
- The seven main types of companies in the US are sole proprietorships, partnerships, LLCs, C corporations, S corporations, nonprofits, and cooperatives.
- There are about 36.2 million small businesses in the US, making up 99.9% of all businesses, according to the SBA Office of Advocacy.
- Sole proprietorships are the most common type, with about 31 million nonfarm returns filed for tax year 2022.
- LLCs and corporations protect owners’ personal assets, while sole proprietors and general partners are personally liable for business debts.
- C corporations pay a 21% federal income tax, while partnerships, LLCs, and S corporations usually pass profits through to the owners’ personal tax returns.
What Is a Company?
A company is an organization that runs a business, such as selling products or services, usually to earn a profit. In everyday language, “company” and “business” mean the same thing. Companies can sell to consumers or to other organizations in business markets. In law, a company’s business structure, also called its legal entity, decides how it is owned, taxed, and protected.
The Internal Revenue Service (IRS) lists the sole proprietorship, partnership, corporation, S corporation, and LLC as the main business structures. The Small Business Administration (SBA) adds options such as limited partnerships, benefit corporations, nonprofits, and cooperatives.
What Are the 7 Main Types of Companies?
Here is a quick overview before we look at each one:
| Type of Company | Owners | Personal Liability | How It Is Taxed | US Example |
|---|---|---|---|---|
| Sole proprietorship | 1 person | Unlimited | Owner’s personal return (Schedule C) | A local freelance designer |
| Partnership | 2 or more people | Unlimited for general partners | Passes through to partners (Form 1065) | Deloitte LLP (an LLP) |
| LLC | 1 or more members | Limited | Pass-through by default, or as a corporation by election | Many small businesses and startups |
| C corporation | Shareholders (no limit) | Limited | 21% corporate tax, plus tax on dividends | Apple, Microsoft |
| S corporation | Up to 100 shareholders | Limited | Passes through to shareholders | Many family-owned firms |
| Nonprofit | No owners | Limited | Tax-exempt if approved by the IRS | American Red Cross |
| Cooperative | Members | Limited | Profits shared among members | REI, Ocean Spray |
1. Sole Proprietorship
A sole proprietorship is a business owned and run by one person, with no legal separation between the owner and the business. It is the simplest and most common type of company in the US. According to IRS data, about 31 million nonfarm sole proprietorship returns were filed for tax year 2022.
The owner keeps all the profit but is personally responsible for all business debts. Profits are reported on Schedule C of the owner’s personal tax return, and the owner also pays self-employment tax.
Example: a freelance writer, a home baker, or a solo plumber.
2. Partnership
A partnership is a business owned by two or more people who share profits, losses, and responsibilities. The IRS defines it as “the relationship between two or more people to do trade or business.” A partnership files Form 1065, but it does not pay income tax itself. Profits pass through to each partner.
There are three main kinds:
- General partnership: all partners share management and have unlimited personal liability.
- Limited partnership (LP): one general partner has unlimited liability, while limited partners risk only their investment.
- Limited liability partnership (LLP): each partner is protected from the partnership’s debts. LLPs are common among professional firms such as accounting and law firms, including Deloitte LLP.
3. Limited Liability Company (LLC)
A limited liability company (LLC) is a business structure created under state law that protects owners’ personal assets while keeping taxes simple. Its owners are called members. By default, a single-member LLC is taxed like a sole proprietorship, and a multi-member LLC is taxed like a partnership. An LLC can also choose to be taxed as a corporation.
LLCs are now the most popular choice for partnerships. IRS data shows that LLCs made up 72.7% of all partnership returns in tax year 2023. Learn more in our full guide to what an LLC is.
Example: a two-person marketing agency or a family-run rental property business.
4. C Corporation
A C corporation is a separate legal entity owned by shareholders, with the strongest protection from personal liability. It can have unlimited shareholders and sell stock to raise money, which is why almost all large public companies are C corporations.
The trade-off is double taxation. The corporation pays a 21% federal income tax on its profits, and shareholders pay tax again on any dividends they receive. Corporations file Form 1120.
Example: Apple and Microsoft, both traded on the Nasdaq.
5. S Corporation
An S corporation is not a separate type of company but a special tax status that a corporation or LLC can choose. It lets profits pass through to the owners’ personal tax returns, avoiding double taxation.
To qualify, the IRS requires that an S corporation:
- Is a US (domestic) corporation
- Has no more than 100 shareholders
- Has only one class of stock
- Has only allowed shareholders, such as individuals, certain trusts, and estates, but not partnerships, corporations, or nonresident aliens
Owners elect S corporation status by filing Form 2553. S corporations are very common. They file about 6.2 million returns a year, according to the IRS Data Book.
Example: a family-owned restaurant chain or a small consulting firm.
6. Nonprofit Organization
A nonprofit is an organization formed to serve a public, charitable, educational, religious, or scientific purpose instead of making a profit for owners. If approved under Section 501(c)(3), it does not pay federal income tax, and donors can often deduct their gifts.
Nonprofits have no owners, and none of their earnings can go to private individuals. They also face limits on lobbying and cannot support political campaigns.
Example: the American Red Cross, the YMCA, and most private universities.
7. Cooperative
A cooperative, or co-op, is a business owned and run by the people who use its services, such as customers, workers, or farmers. Members vote on major decisions, and profits are shared among them.
Examples:
- REI, the outdoor retailer, is a consumer co-op with more than 26 million lifetime members.
- Ocean Spray is an agricultural co-op of around 700 family farmers.
- Land O’Lakes has been farmer-owned since 1921.
What Is a Benefit Corporation?
A benefit corporation, called a public benefit corporation (PBC) in Delaware, is a for-profit company that must also pursue a public or social purpose. It is taxed like a C corporation. Warby Parker, the eyewear brand, became a public benefit corporation in 2021, and Patagonia was the first company to register as a California benefit corporation in 2012.
Do not confuse this with a B Corp, which is a certification from the nonprofit B Lab, not a legal structure.
How Many Companies of Each Type Are There in the US?
How many companies are there? The US has about 36.2 million small businesses alone, according to the SBA Office of Advocacy. Small businesses make up 99.9% of all US businesses and employ 62.3 million people. Here is how the main types compare, based on IRS tax data:
| Business Type | Approximate Number | Tax Year |
|---|---|---|
| Nonfarm sole proprietorships | 31.0 million returns | 2022 |
| Partnerships (including LLCs) | 4.6 million returns | 2023 |
| Pass-through corporations (mostly S corps) | 5.3 million | 2022 |
| C corporations | 1.6 million | 2022 |
These are counts of tax returns, so they show the size of each group, not an exact count of unique businesses.
What Are Other Ways to Classify Companies?
Besides legal structure, companies are also grouped by who owns their shares and how they are controlled.
Public vs. Private Companies
A public company sells its shares on a stock exchange, such as the New York Stock Exchange (NYSE) or Nasdaq, and must report its finances to the Securities and Exchange Commission (SEC). A private company is owned by founders, families, or investors, and its shares are not traded publicly.
| Public Company Examples | Private Company Examples |
|---|---|
| Apple (Nasdaq: AAPL) | Cargill |
| Microsoft (Nasdaq: MSFT) | Koch Industries |
| Warby Parker (NYSE: WRBY) | Mars |
| Alphabet (Nasdaq: GOOGL) | Publix |
Cargill, Koch Industries, Publix, and Mars were ranked as four of the largest private companies in America on the 2023 Forbes list.
Holding and Subsidiary Companies
A holding company owns a controlling share of other companies, called subsidiaries. The best-known US example is Alphabet, created in 2015 as Google’s parent company. Since then, Google has been a subsidiary of Alphabet, alongside other businesses like Waymo.
Government-Owned Companies
Some US businesses are owned or controlled by the federal government. The US Postal Service (USPS) has been an independent agency of the executive branch since 1971, and it generally receives no tax dollars for operating expenses. Amtrak is a federally chartered corporation run as a for-profit company and majority-owned by the federal government.
What Are the Types of Companies in the UK?
Readers outside the US will see different names for similar structures:
| Country | Common Company Types | Closest US Equivalent |
|---|---|---|
| United Kingdom | Private limited company (Ltd), public limited company (PLC), company limited by guarantee | LLC or corporation; nonprofit for guarantee companies |
A PLC in the UK is similar to a US public corporation, since it can sell shares to the public. A company limited by guarantee is often used by charities and clubs.
How Do You Choose the Right Type of Company?
The right structure depends on your risk, your tax situation, and your growth plans. Follow these steps:
- Assess your risk. If your business could face lawsuits or large debts, choose an LLC or corporation to protect your personal assets.
- Count your owners. One owner can start with a sole proprietorship or single-member LLC. Two or more owners should consider a partnership or multi-member LLC.
- Think about taxes. Pass-through structures avoid double taxation. Once profits grow, many owners elect S corporation status to lower self-employment taxes.
- Plan for investors. If you want to raise venture capital or go public one day, a C corporation is usually required.
- Check your purpose. If your goal is charity or community service, a nonprofit may qualify for tax exemption.
- Talk to a professional. Rules differ by state, so speak with an accountant or attorney before you register.
You can also change structures as you grow. For example, Blackstone, the investment firm, converted from a publicly traded partnership to a corporation in 2019.
Bottom Line
The most common mistake I see in small business owners is choosing a structure by habit instead of by need. Many people start as sole proprietors without realizing their personal savings are at risk, while others form a corporation too early and pay for paperwork they do not need. For most new US businesses, an LLC is the smart middle ground, with protection now and the option to elect S corporation status later. Pick the simplest structure that protects you, then upgrade as your business grows.
Frequently Asked Questions
The seven main types of companies in the US are sole proprietorships, partnerships, limited liability companies (LLCs), C corporations, S corporations, nonprofit organizations, and cooperatives. Each type differs in who owns it, how much personal liability the owners carry, and how profits are taxed. Some lists also include benefit corporations, which pursue both profit and a public purpose.
The four common types of corporations in the US are C corporations, S corporations, nonprofit corporations, and benefit corporations. C corporations pay a 21% federal corporate tax, S corporations pass profits to shareholders, nonprofits can be tax-exempt, and benefit corporations must pursue a social purpose. The SBA also lists close corporations, which have fewer shareholders and fewer formalities.
The sole proprietorship is the most common type of company in the US. About 31 million nonfarm sole proprietorship returns were filed for tax year 2022, according to IRS data. It is popular because it is easy and cheap to start, but the owner is personally liable for all business debts, which is why many owners later switch to an LLC.
An LLC is a flexible structure created under state law that protects owners and usually passes profits through to their personal tax returns. A corporation is a separate entity owned by shareholders that can sell stock to raise money. A C corporation pays a 21% corporate tax, and its shareholders pay tax again on dividends, while LLCs usually avoid this double taxation.
Public companies sell shares on a stock exchange, such as Apple and Microsoft on the Nasdaq or Warby Parker on the NYSE. Private companies are not traded publicly. Some of the largest US private companies are Cargill, Koch Industries, Mars, and Publix. Public companies must report their finances to the SEC, while private companies generally do not.
For most small businesses, an LLC is the best starting point because it protects your personal assets and keeps taxes simple. Sole proprietorships suit very low-risk solo businesses, while C corporations suit startups that plan to raise investor money. As profits grow, many LLC owners elect S corporation tax status to save on self-employment taxes.
Yes. Companies often change structure as they grow. A sole proprietor can form an LLC, an LLC can elect to be taxed as an S corporation, and a partnership can convert to a corporation. For example, Blackstone converted from a publicly traded partnership to a corporation in 2019. Each change has tax and legal effects, so get professional advice first.
