Blog 2015 November The 4 Major Business Organization Forms Show
The 4 Major Business Organization FormsBusiness organization is the single-most important choice you’ll make regarding your company. What form your business adopts will affect a multitude of factors, many of which will decide your company’s future. Aligning your goals to your business organization type is an important step, so understanding the pros and cons of each type is crucial. Your company’s form will affect:
There are 4 main types of business organization: sole proprietorship, partnership, corporation, and Limited Liability Company, or LLC. Below, we give an explanation of each of these and how they are used in the scope of business law. Sole ProprietorshipThe simplest and most common form of business ownership, sole proprietorship is a business owned and run by someone for their own benefit. The business’ existence is entirely dependent on the owner’s decisions, so when the owner dies, so does the business. Advantages of sole proprietorship:
Disadvantages:
PartnershipThese come in two types: general and limited. In general partnerships, both owners invest their money, property, labor, etc. to the business and are both 100% liable for business debts. In other words, even if you invest a little into a general partnership, you are still potentially responsible for all its debt. General partnerships do not require a formal agreement—partnerships can be verbal or even implied between the two business owners. Limited partnerships require a formal agreement between the partners. They must also file a certificate of partnership with the state. Limited partnerships allow partners to limit their own liability for business debts according to their portion of ownership or investment. Advantages of partnerships:
Disadvantages:
CorporationCorporations are, for tax purposes, separate entities and are considered a legal person. This means, among other things, that the profits generated by a corporation are taxed as the “personal income” of the company. Then, any income distributed to the shareholders as dividends or profits are taxed again as the personal income of the owners. Advantages of a corporation:
Disadvantages:
Limited Liability Company (LLC)Similar to a limited partnership, an LLC provides owners with limited liability while providing some of the income advantages of a partnership. Essentially, the advantages of partnerships and corporations are combined in an LLC, mitigating some of the disadvantages of each. Advantages of an LLC:
Disadvantages:
If you need assistance with any aspect of your firm's business organization needs, reach out to our firm for the legal assistance you need. We can help clients clarify their business choices, so call now! What is the business organization composed of two or more persons who combine their resources in a business intending to make a profit?Partnership. A partnership (or general partnership) is a business owned jointly by two or more people.
What is the type of business organization that is composed of two or more people?As the name states, a partnership is a business owned by two or more people, known as partners. Like sole proprietorships, partnerships are able to take advantage of flow-through taxation.
Which is an agreement in which two or more persons combine their resources in a business with view to making profit?Partnership. A partnership is often described as a voluntary association of two or more people who jointly own and carry on a business for profit. For example, partners in a law firm who work together to provide legal services for profit. Joint Venture.
What is it called when 2 companies work together?A merger is an agreement that unites two existing companies into one new company. There are several types of mergers and also several reasons why companies complete mergers. Mergers and acquisitions (M&A) are commonly done to expand a company's reach, expand into new segments, or gain market share.
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