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The three basic types of organizational structures are proprietorships, partnerships, and corporations. 

Proprietorship

A proprietorship (or self proprietorship as it is also known) is the easiest type of organization to form.  It is formed by an individual who runs the company without any separation of his or her personal wealth and that of the firm.  An additional advantage (although it can be disadvantageous depending on tax rates) is that the money the firm makes flows through to the individual's tax return.  This allows the individual to avoid the concept of double taxation.  Finally, an advantage of this (however slight) would be that the customers know the proprietor is personally liable which may mean the proprietor would work harder and have a better quality product.

Disadvantages of this sort of structure are numerous: 

1. it is difficult to raise the money necessary to grow the firm
2. the owner cannot easily "cash-out"
3. income flows through the individual's taxes (which may be an advantage or disadvantage)
4. there is a personal liability for any of the debts of the firm.  Thus, if the business were to fail, or if it were to get sued, the proprietor could be personally liable and would have to put more money into the business.

A partnership is in many ways a group of people forming a proprietorship.  The advantage is still that they are easy to form.  A partnership is only good for the life of the partners.  If one dies, or decides to leave the partnership, a new partnership must be formed. 

1. General Partnerships-all partners are equally responsible for the firm's liabilities.
2. Limited Partnerships-allow limited partners to invest in the firm without the personal liability so long as they do not actively manage the firm.  There still must be a general partner who is personally liable.

The corporation is generally the organizational structure of choice for large firms.  the reasons are numerous.  A corporation is recognized in the United States as a legal entity.  This allows for the corporation, and not its investors, to be liable for liabilities.  This limited liability allows firms to raise money much easier since the most a shareholder can lose is the amount invested.

Moreover the shares of a corporation are generally transferable.  This allows shareholders to more easily sell their shares.

As legal entities, corporations are taxed.  This can be a problem as if the investor wants to receive a dividend, the company must pays the dividend with money that has already been taxed.  When the investor receives the dividend, (s)he too must pay taxes on it.  Hence the concept of double taxation.

Because of the ease of transferring shares and the limited liability, almost all large businesses are corporations.
 

As with anything, we do have some exceptions. 

S-Corps are corporations that pass through the earnings to their investors.  The investor must then pay the tax.  This gets around double taxation while maintaining the limited liability benefits of a corporation. Only firms with fewer than 35 shareholders can qualify under the IRS's rulings as an S-Corp.  (Note that as a result of S-Corps, many now use C-Corp to distinguish a normal corporation.  that does not pass through its earnings.)

Limited Liability Companies (LLC) are in some ways the best of both worlds.  They allow for limited liability but also allow the tax benefits of the S-Corp without the restrictive qualifications of the S-Corp.  These are relatively new and only allowed in certain states  Further they do not have the rich history of tax and civil law behind them to set precedence.