The single most important decision you can make in your business is a business organization. A multitude of variables will influence what shape your company adopts, all of which will determine the future of your company. Aligning your priorities with your form of business organization is an essential move, so it is vital to consider the pros and cons of each type. We offer an overview below of each of these and how they are used in the scope of business law.
What Are The Major Business Forms
Single ownership, the simplest and most popular type of business ownership, is a corporation owned and managed by someone for their own benefit. The life of the company is solely based on the actions of the owner because when the owner dies, the company does so.
All income is subject to the owner and proprietorships have very little regulation. When running the business, the owners have complete freedom with very few starting requirements, sometimes it’s just a company license.
Corporations are independent entities for tax purposes and are assumed to be legal entities. Among other items, this means that the profits generated by a business are taxed as the company’s “personal income.” Any revenue paid as dividends or gains to the shareholders is then taxed again as the owners’ personal income.
It reduces the owner’s responsibility for debts or damages, and the company retains the gains and losses. These can be passed reasonably quickly to new owners and it is not possible to seize personal properties to pay for company debts.
These come in two kinds: general and small, respectively. Both owners spend their capital, land, labor, etc. on the company in general partnerships and are both 100 percent responsible for business debts. In other words, you are still potentially accountable for all of your debt, even though you spend a little in a general partnership.
General partnerships do not require a formal partnership agreement that could be verbal or even tacit between the two owners of the company. Restricted partnerships ensure that the parties have a written agreement. They must also register with the state a certificate of collaboration.
These are the three major business forms and apart from these another one also known as LLC. We hope that the provided information has been of help to you. Do leave a comment below about the above-mentioned information to incase of any queries.