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Forensic Accounting and Fraud Investigation for Non-Experts, 3rd Edition by Michael Sheetz, Howard Silverstone, Frank Rudewicz, Stephen Pedneault

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CHAPTER 4

Forms of Entities

Basics of Business Structures

When discussing the role that business plays in crime, it is important to first understand the various business structures the forensic investigator may encounter. There are essentially three main types of business entities that are recognized in most common law countries: the sole proprietorship, the partnership, and the corporation. Other variations of entities also discussed in this chapter include professional corporations (PCs), limited liability corporations (LLCs), and limited liability partnerships (LLPs).

In the United States, the regulation of business entities and the forms under which they may legally transact business are entirely within the purview of the individual states. Because of this, each individual state has crafted its own rules and regulations dealing with each type of business entity. While there are similarities among them, it is advisable that you check your local jurisdiction to determine any particular nuances unique to your own state.

Consider this comment from the Organization for Economic Co-Operation and Development (OECD):

Almost every economic crime involves the misuse of corporate entities—money launderers exploit cash-based businesses and other legal vehicles to disguise the source of their illicit gains, bribe-givers and recipients conduct their illicit transactions through bank accounts opened under the names of corporations and foundations, and individuals hide or shield their wealth ...

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