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Choosing a Business Entity Businesses are formed and operated in legally recognized entities (also called business organizations). Most states provide business owners and managers several alternative entities to choose from. Factors used to determine the best choice of entity for a particular business concern include liability, tax, capitalization, and intended management of the business. The owners of a business, called principals, determine their choice of business entity based on the respective advantages and disadvantages of each. Roll over the items to read a hint about what type of choice of entity consideration best matches the item. Then click and drag each item to the correct consideration, Liability Capitalization Day-to-Day Involvement in Business Operations Pass-Through Entity Taxation Personal Assets at Risk Management Solling Ownership