Unincorporated types of business

Sole Proprietorships The oldest, most common form of private business ownership is the sole proprietorship. A sole proprietorship is a business owned and managed by one individual. That person may receive help from others in operating the business but is the only boss. The sole owner, often aided by one or two employees, operates a small shop that frequently caters to a group of regular customers. The capital (money) needed to start and operate the business is normally provided by the owner through personal wealth or borrowed money. The sole proprietor is usually an active manager, working in the shop every day. He or she controls the operations, supervises the employees, and makes the decisions. Partnerships A business may have a small beginning as a sole proprietorship, later expand into a partnership, and finally become a corporation. Many corporate giants (e.g., H. J. Heinz, and Ford) started as sole proprietorships. A partnership is an association of two or more persons to carry on as co-owners of a business for profit. Other than the difference in the number of owners, a partnership is similar in many respects to a sole proprietorship. A partnership can be based on a written contract or a voluntary and legal oral agreement. The law regards individuals as partners when they act in such a way as to make people believe they operate a business together.

Types of Partnerships The three major types are general partnership, limited partnership, and joint venture. A general partnership is a business with at least one general partner who has unlimited liability for the debts of the business. A limited partnership has at least one general partner and one or more limited partners (discussed below). The joint venture is a special type of partnership established to carry out a special project or to operate for a specific time period. Let’s look at each type separately.

General partnership Regardless of the percentage of the business they own, general partners have authority to act and to make binding decisions as owners of the business. The general partner may be liable for all the debts of the business; by contrast, the sole proprietor is always liable for such debts. Partners generally share profits and losses according to a plan specified by agreement between them.

Limited partnership All partnerships must have at least one general partner. A limited partnership includes one or more general partners and one or more limited partners. The general partners arrange and run the business, while the limited partners are investors only. Limited partners legally may have no say in managing the business. If this requirement is violated, the limited partnership status is dissolved. Limited partnerships are usually found in real estate, dentistry, and various international arrangements. A limited partner has limited liability, being liable for loss only up to the amount of capital invested. Thus, a limited partner who invests $30,000 in the business is liable for only that amount. In contrast, general partners have unlimited liability in the partnership.

Joint venture Sometimes a number of individuals and businesses join together in order to accomplish a specific purpose or objective or to complete a single transaction.

An association of two or more businesses for a particular business purpose is a syndicate. In most cases, syndicates engage in financial transactions. Unlike a joint venture, a syndicate need not be dissolved after the transaction is completed. The members of a syndicate can sell their ownership interest to buyers of their choice.

A business trust is often used to hold securities for investors. In its simplest form, a trust allows the transfer of legal title to a property of one person for the use and benefit of another. The original name for this form of business was the Massachusetts trust, because it was created in that state when the laws did nor allow corporations to buy and sell real estate.

Дата добавления: 2015-10-31