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Business Structures – Types of Business

A business is defined simply as an existing entity or company engaged in commercial, professional, or agricultural activities. For most of history, business has been thought of as a public or private entity whose products are traded or sold to customers at a market price. More recently, the idea of business has been understood to include other types of entities such as partnerships, limited liability companies (LLCs), and corporations. Businesses may be privately owned by one or a handful of owners, publicly held commercial enterprises, or privately operated cooperatives. Companies may be publicly traded, privately owned, or partly public.

Introduction

The three main types of business entity are a corporation, partnership, and limited liability company. A corporation is a separate legal entity from its shareholders or owners. In most countries, corporations are subject to public law while partnerships are under common law. Private limited liability companies (LLCs) are formed for the purpose of conducting particular types of business. A partnership is a relationship between two or more persons, including the partners, who share in the profits, losses, or value of the business.

The most familiar form of business structure is the corporation. In the United States, the two basic types of corporation are limited liability company (LLC) and partnership. A limited liability company is a separate entity from its investors, which allows it to protect itself against debts and lawsuits. In contrast, a partnership is a type of corporation that allows many partners to share in the profits by pooling their money or purchasing stock in the business.

Corporation

Partnerships are a type of corporation where two or more entities share equal shares in the assets of the entity. For example, partnerships are the forms of business relationships where one partner makes regular payments to the other in return for benefits. In most jurisdictions, partnership agreements specify the percentage of share capital or equity capital each partner is entitled to, as well as the terms of the partnership.

There are many businesses that qualify as partnerships, such as partnerships that make money by renting or leasing offices or rooms. Many partnerships will incorporate as individual companies and maintain ownership and control of the company, instead of the other partner controlling the entity. A sole proprietor is an individual who owns the business solely, with no partner shares. Examples of sole proprietorships are restaurants, retail stores, and certain types of partnerships.

About

An LLC, or limited liability company is a legal entity, though one may not have limited liability. Limited liability companies are known as LLCs because they keep most of their earnings under the control of their owners. Unlike partnerships, an LLC does not distribute its profits to its partners or investors. Instead, the profits are divided among the LLC owners or partners, depending on the agreement. Profits are also tax-free when they are distributed to the LLC owners or partners.

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