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Types of Business Structures in Tennessee


If you are thinking about starting a business, the first thing you need to do is choose the right kind of structure for it. Your business structure will determine how you manage, operate, and ultimately expand your business. As with any business decision, there is no one-size-fits-all solution regarding your business’ structure. In Tennessee, there are four main types of business structures. Below, our Knoxville business and commercial law attorney explains what these are.

Sole Proprietorship 

The most common type of business structure is a sole proprietorship. It is also the simplest, as only one person owns and operates the business. Sole proprietorships are not separate legal entities from the owner, meaning that the business and the owner are one and the same. Sole proprietorships have many benefits, including being relatively easy and affordable to start and maintain. However, due to the fact that the business is the same as the owner, the owner is exposed to personal liability and growth potential may be somewhat limited.


Partnerships are operated by two or more people. All partners will share in both the profits and the losses of the company. The three types of partnerships are as follows:

  • General partnership: All partners in a general partnership have the same rights and responsibilities when running the business. All partners are all personally liable for the obligations, debts, claims, and lawsuits against the company.
  • Limited partnership: Limited partners do not manage or operate the business but instead, they are silent investors. Beyond the amount of their investment, limited partners are not personally liable for any debts the company carries.
  • Limited liability partnership: In a limited liability partnership, none of the partners are responsible for the obligations and debts of the company unless they were caused by their own misconduct, negligence, or fraud.


 Corporations are separate legal entities from the owners. The business has its own rights and responsibilities, as well as its own liabilities. A corporation has shareholders who elect a board of directors, as well as a management team, who are chosen by the board of directors. The two types of corporations are as follows:

  • C corporations: Shareholders are not personally responsible for the obligations and debts of the business unless they are caused by their own misconduct, negligence, or fraud. The business pays taxes on its revenue and the shareholders pay taxes on their dividends.
  • S corporations: An S corporation does not pay taxes on its revenue. Instead, the revenue and losses are passed on to the shareholders. There are more limitations in S corporations than C corporations.

Limited Liability Companies 

Limited liability companies combine the features of a corporation and a partnership. The owners in an LLC are known as members and they are separate entities from the business. LLCs offer flexibility and protection from liability, and they are not doubly taxed as C corporations are. However, growth potential and financing may be limited.

Call Our Business and Commercial Law Attorney in Knoxville for Help 

Choosing the right business structure for you is not always easy. At Atkins Brezina, PLLC, our Knoxville business and commercial law attorney can explain the benefits and drawbacks and help you make the best decision for you. Call us now at 865-500-3121 or contact us online to schedule a consultation and to get more information.



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