What is a business entity?

A business entity is a legal structure used to establish a business. In Alabama, there are four types of business entities: sole proprietorships, partnerships, limited liability companies (LLC), and corporations. A sole proprietorship is the most basic type of business entity. It is owned and managed by a single individual, and the owner is personally liable for all debts of the business. A partnership is a business entity that is owned by two or more individuals. In a partnership, each partner is jointly and severally liable for all debts of the business. A limited liability company (LLC) is a business entity that has the benefits of both a corporation and a partnership. LLCs provide limited liability protection for their members, meaning that the members are not personally liable for the debts of the LLC. Finally, a corporation is a business entity that is owned and managed by shareholders. The shareholders are not personally liable for the debts of the corporation, and the corporation is considered its own separate legal entity. Asset protection law in Alabama provides business owners with a set of legal principles and instruments that can be used to minimize their exposure to risks and liabilities. By forming a business entity that fits their particular needs, business owners can ensure that their personal assets are protected from creditors and other liabilities that may arise.

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