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! Which of the following forms of organization are considered to be separate entities by accountants?Corporation. A corporation (sometimes called a regular or C-corporation) differs from a sole proprietorship and a partnership because it's a legal entity that is entirely separate from the parties who own it.
Which form of business organization is established as a separate?A business organized as a separate legal entity owned by stockholders is a corporation.
What is the form of business organization which has a separate legal entity from its shareholders stockholders?A corporation is a legal entity that is separate and distinct from its owners. Under the law, corporations possess many of the same rights and responsibilities as individuals. They can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes.
Which of the following is considered by accountants to be a separate entity from its owner's )?An accounting entity can be structured as a corporation or sole proprietorship, a subsidiary within a corporation, or a special purpose vehicle (SPV). An accounting entity must have a set of books or financial records detailing its assets and liabilities that is separate from those of the owner.
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