Final answer:
The four common types of business organizations are sole proprietorship, partnership, corporation, and LLC. Sole proprietorships and general partnerships leave the owner(s) personally liable for business debts, whereas corporations and LLCs limit personal liability.
Step-by-step explanation:
There are four common types of business organizations, and they differ in terms of owner liability and other characteristics. The first type, sole proprietorship, is owned and operated by one person. In this form, the owner is personally liable for all debts and obligations of the business. This makes it easy to start and manage, yet poses a significant risk to the owner's personal assets.
The second type is a partnership, which involves two or more people. Owners (partners) share responsibility, profits, and liabilities. General partners are similarly personally liable for business debts and legal actions.
The third type is a corporation. This is a separate legal entity from its owners (shareholders), shielding them from personal liability. Corporations can raise capital easier but are subject to more regulations and taxation.
Lastly, a Limited Liability Company (LLC) offers limited personal liability protection to its owners, known as members. LLCs provide a flexible management structure and are treated as a partnership for tax purposes.
Of these four, corporations and LLCs provide the least amount of personal liability for the owners, while sole proprietorships and general partnerships expose owners to full personal liability.