Introduction to New Colorado Entities by Gary S. Joiner, Esq. Sole proprietorships are the most basic form of business organization and are at one end of the spectrum of the available forms of business entities.
Corporations are at the opposite end of the spectrum of available forms of business entities.
They provide a liability shield for their shareholders, have a centralized management group consisting of the board of directors elected by the shareholders, and are separated from their owners for tax purposes. In other words, income tax is imposed at the entity level on the net profits of a corporation, and when the net profits are distributed in the form of dividends, a second tax is imposed at the shareholder level. In between sole proprietorships and corporations, on the spectrum of available forms of business organization, is a variety of other forms of organization. They are all pass-through entities for tax purposes and may be compared or ranked on the basis of the extent to which they have the corporate characteristics of limited liability and centralized management. A brief description of these unincorporated business organizations follows.