There are three common types of business organizations: proprietorship, partnerships, and corporations. In some cases, the accounting procedures of a business depend on which organization form the business takes.
Legal status
A proprietorship business and a partnership business are not legal entities separate from their owners. A corporation is a distinct entity. The corporation operates as an artificial person that exists apart from its owners.
Income taxes
Income from the proprietorship and partnership businesses is taxable to their owners, not to the business. The corporation is taxed on its income, and the owners are taxed on any income they receive from the corporation.
Accounting Procedures
In accounting, regardless of which form of organization, the owner and the business are considered separate entities, and separate records are kept for each.
