Several Types of Corporate Formations
A business is often defined as any type of organization that engages in business, commercial, or professional activities for profit. Businesses may be for-profit or non-profit entities that conduct business to meet a social purpose or further a humanitarian mission. There are many types of businesses, including manufacturing, retailing, transportation and service, technology, and intellectual property. In any case, the business owner is the person who controls the company, holds overall authority, and determines the extent and methods of how the business will perform.
There are many different ways in which companies can legally exist. One way in which these companies can operate legally is through limited liability partnerships (LLPs). An LLP is a legal entity that exists for the benefit of all the business owners associated with it. The business owners typically control the ownership structure of the LLC, while the state, for example, provides oversight and regulations related to the LLC’s activities. Some jurisdictions allow the general public to register corporations and limited liability partnerships, although these types of business structures are not legally considered as franchises.
Limited liability partnerships (also known as LLCs) are considered a type of corporation, but an LLC is not considered as a separate entity from its owners. Because of this, an LLC cannot have its own main article of business operation and cannot carry out any of the business operations that would otherwise be allowed with a corporation. Instead, the business of the LLC is conducted within the capacity of the main article of the business enterprise, the LLC.
Another example of a business structure that combines the two business elements is a partnership. A partnership is a relationship between two or more people, where one person owns the partnership and has the power to manage and control the partnership. Partnerships may be created in numerous forms. For instance, a partnership can be a general partnership, a partnership between two independent contractors, or a partnership in which one member is a corporation and the other is not. When a business combines these two business elements, it is often referred to as a business partnership.
As mentioned earlier, partnerships do have their advantages. One such advantage is the ability for a business owner to control his or her own finances and investments. A partnership may only allow its partners to share in the profits from the business; however, the business owner still owns the entire partnership. A sole proprietorship does not allow any partnership partner to share in the business’ profits, although a sole proprietorship will only share in the profits of the business itself. In general, a business owner will benefit from owning a partnership over a sole proprietorship because he or she will receive greater profits from the business.
As previously stated, some businesses incorporate as sole proprietors, while others incorporate as partnerships, or even as for-profit businesses. Business owners should consider the pros and cons of incorporating before making a decision. Both sole proprietor and for profit businesses are very successful but incorporating one can present many advantages.