Ok so two possible situations for people who run small businesses you can have a privately owned and operated business where the sole owner (typically people who are freelancers or self employed) have certain Tax and operating laws (depending on where you are), these are usually quite lax. However if you operate like that you are personally liable for your debts etc (this makes it risky as a law suit would cost you everything. To get around that liability you can set up a Limited Liability Company (LLC) wherein you retain the control and the bulk of the Tax/operating freedoms but have the saftey of being able to separate yourself from the company financially if needed. In other words consider the following, if you sue a private company the owner is going to be selling cars and houses to pay you back. If you sue an LLC the owner can declare bankruptcy of the company but not themselves and walk away unscathed.
