Comparison between the types of enterprises in US and China

July 22, 2025 - By Shawn

Table 1: Detailed Explanation of Major U.S. Business Types

Business Category	Subtype	Definition	Core Characteristics	Typical Use Cases
Sole Proprietorship	Sole Proprietorship	A business form where an individual operates directly without a separate legal entity	1. No need to register as a legal entity; business activities are fully tied to personal assets.2. The owner bears unlimited liability.3. For tax purposes, profits are directly included in personal income tax (no corporate income tax).4. Simple operational structure with no complex management hierarchy.	Small retail businesses (e.g., neighborhood convenience stores), freelancers (e.g., independent designers, consultants), family-run workshops, etc.
Partnership	General Partnership	A business form where two or more parties co-invest, co-manage, share profits, and bear risks	1. All partners participate in management with equal decision-making power.2. All partners bear unlimited joint liability for business debts.3. For tax purposes, profits are distributed proportionally and included in partners’ personal income tax (no corporate income tax).4. No formal registration required, but a partnership agreement is recommended to clarify rights and obligations.	Small startup teams (e.g., jointly operated studios), family collaborative businesses, low-cost service projects, etc.
	Limited Partnership (LP)	A partnership consisting of general partners and limited partners	1. General partners manage daily operations and bear unlimited liability.2. Limited partners only invest, do not participate in management, and bear liability up to their investment amount.3. Tax treatment is the same as general partnerships; profits “pass through” to partners’ personal taxes.4. Must register with the state, disclosing partners’ identities and liability divisions.	Venture capital funds, real estate investment projects, startups seeking passive investors, etc.
	Limited Liability Partnership (LLP)	A special partnership form primarily for professional services	1. Partners bear unlimited liability for debts caused by their own professional conduct.2. No liability for the negligence or misconduct of other partners.3. Must register with the state; most states require professional liability insurance.4. Taxed as a partnership, with profits passing through to individuals.	Law firms, accounting firms, architectural firms, and other professional service institutions.
Limited Liability Company (LLC)	Limited Liability Company (LLC)	A hybrid business form combining partnership tax flexibility with corporate limited liability	1. Owners (members) bear limited liability up to their investment; personal assets are separated from business assets.2. No minimum capital requirement; flexible management structure (can be managed by members or third parties).3. Tax options: “pass-through taxation” (profits in personal income tax) or corporate income tax.4. Simple registration process (varies by state) but requires filing articles of organization.	Small and medium-sized enterprises (e.g., tech startups, franchise stores), cross-border businesses, entrepreneurs balancing risk and tax costs.
Corporation	C-Corporation	A separate legal entity with clear ownership structure, suitable for large-scale operations	1. Shareholders bear limited liability proportional to their holdings; no limit on the number of shareholders.2. Can publicly issue shares for financing and listing.3. Subject to corporate income tax; dividends to shareholders are taxed again (double taxation).4. Formal management structure required (board of directors, board of supervisors, etc.).	Large enterprises (e.g., multinational corporations), companies planning to go public (e.g., tech giants), businesses needing large-scale financing.
	S-Corporation	A small corporation with special tax benefits, subject to eligibility criteria	1. Maximum 100 shareholders; limited to U.S. citizens or residents.2. Profits pass through to shareholders’ personal taxes (avoids double taxation).3. Simple ownership structure; cannot issue multiple classes of stock.4. Requires IRS approval to qualify for S-Corp tax treatment.	Small and medium-sized local businesses (e.g., regional chains), family-owned businesses, companies with simple ownership seeking lower tax burdens.

Table 2: Detailed Explanation of Major Chinese Business Types

Business Category	Subtype	Definition	Core Characteristics	Typical Use Cases
Individual Business Entity	Individual Business Entity	A legal form for natural persons engaged in individual operations, part of the individual economy	1. No capital requirement; simple registration process (only a business license needed).2. Usually small-scale operations; owner bears unlimited liability with personal or family assets.3. Not a legal person; most use deemed taxation or simplified tax calculation.4. Flexible decision-making; ownership and management are highly unified.	Small restaurants, neighborhood convenience stores, street vendors, small handicraft production and sales, etc.
Sole Proprietorship Enterprise	Sole Proprietorship Enterprise	A business form invested by a natural person, with assets owned personally, operating independently and assuming full responsibility for profits and losses	1. Requires a business license; has a relatively standardized operational structure but is not a legal person.2. The investor bears unlimited liability for business debts with personal assets.3. Taxed under personal income tax (no corporate income tax).4. Can hire employees, but decisions are made solely by the investor.	Small service businesses (e.g., small housekeeping companies, private clinics), creative studios (e.g., photography studios), special industries (e.g., local product processing and sales).
Partnership Enterprise	General Partnership	A business form where two or more parties co-invest, co-manage, and all bear unlimited joint liability	1. All partners participate in management, share profits, and bear risks.2. All partners bear unlimited joint liability for business debts.3. Must register with industrial and commercial authorities and sign a written partnership agreement.4. Profits are distributed proportionally and taxed as personal income (no corporate income tax).	Small collaborative projects (e.g., jointly operated restaurants), professional service teams (e.g., small consulting firms), resource-complementary startup teams.
	Limited Partnership	A partnership consisting of general partners and limited partners	1. General partners manage operations and bear unlimited liability.2. Limited partners only contribute capital, do not participate in management, and bear liability up to their subscribed capital.3. Partnership agreement must clarify partner types and rights/obligations.4. Suitable for scenarios needing external investment while retaining core team control.	Venture capital funds (e.g., private equity funds), startup incubators, tech R&D projects requiring significant funding.
	Special General Partnership	A special partnership form for professional services with unique liability rules	1. One or more partners bear unlimited liability for debts caused by their intentional misconduct or gross negligence.2. Other partners bear liability up to their share of enterprise assets.3. Must include “特殊普通合伙” (special general partnership) in the name; most require professional liability insurance.	Large law firms, accounting firms, asset evaluation institutions, etc.
Corporate Enterprise	Limited Liability Company (LLC)	A legal entity with capital contributed by up to 50 shareholders, who bear liability up to their subscribed capital	1. Has legal person status; corporate assets are independent of shareholders’ personal assets.2. Simple registration process; capital is subscribed (no minimum limit).3. Subject to corporate income tax; dividends to shareholders are taxed again (double taxation).4. Flexible management structure (can have executive director, supervisor, etc.).	Small and medium-sized enterprises (e.g., manufacturing factories, trading companies), startups (e.g., tech ventures), family businesses.
	Joint Stock Limited Company	A legal entity with capital divided into equal shares; shareholders bear liability up to their subscribed shares	1. Divided into listed and unlisted companies; listed companies can publicly issue shares.2. No limit on the number of shareholders; high share liquidity (listed companies’ shares are publicly traded).3. Strict registration and management regulations; requires a sound governance structure (general meeting, board of directors, board of supervisors, etc.).4. Suitable for large-scale, capitalized operations.	Large enterprises (e.g., state-controlled enterprises), companies planning to go public (e.g., internet giants), businesses needing capital market financing for expansion.

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