trypmo,
It's been a while since I studied accounting, so if you want a very accurate answer either talk to a CPA or do some more web searches. But, I'll try to give you a satisfactory answer.
An individual can start a business and then organize it as a sole proprietorship. This is the easiet and least costly way to organize a business. However, as the owner, you face certain risks. For example, if you are a plumber who has organized his business as a sole proprietorship, and someone brings a lawsuit against you for damaging their property, then not only can the business' assets be used to settle the lawsuit, but so can your personal assets (i.e. your house, boat, checking acct., etc).
As an alternative to a sole proprietorship, you can organize your business so that YOU have more protection as the OWNER. Essentially, the business' assets (i.e. the building, tools, cash, etc.) are at risk, but your own personal items are not at risk. This is the case when you organize as an LLC (limited liability corporation), S-corp (a relatively newer way to organize your business), or a C-corp (this is how companies like Wal-mart, Sears, etc. are set up).
As to which one is better, that is really up to each business. And, that is where a CPA can be effective. You'll have to decide how you want to organize your business by weighing the pros and the cons of each option.
I'm not sure what all of the legal and tax aspects of a P.A. arrangement are like; but, apparently, many professionals in dentistry and other fields utilize this setup.
Lastly, in addition to legal protection, each type of business entity (LLC, C-corp, PA, etc.) has different tax implications. So, depending on how you want the business' and your own income taxed will also influence your decision.
I hope most of this is accurate. I'd really encourage you to find an expert or do some on-line research, if you are really interested.