Forms of business in the usa Active vocabulary

Business in the USA may be organized as one of the following forms:

• sole proprietorship (individual business)

• general partnership

• limited partnership

• corporation

• alien corporation

By nature a sole proprietorship has only one owner who is personally responsible for all debts and obligations of the business as well as claims made against him. There are no shares of stock or certificates or other papers to confer ownership of a sole proprietorship. The owner simply owns all of the assets and liabilities of the business. He may buy, sell, swap, trade, or give away those assets and liabilities freely, although certain kinds of property often have to be registered (for example, motor vehicles). With all the attention paid to corporations, partnerships, limited liability companies, and the other more complex business vehicles in the commercial world, it is still true that many businesses, especially small ones, are simple sole proprietorships. This should not be all that surprising. Many young businesses are “mom and pop” enterprises, with both the decision – making and the work output resting in the hands of very few, even one, number of people. Many professionals, too, practice their work by themselves, and they avoid the record-keeping and report filing responsibilities that the government imposes on many kinds of business entities.

A general partnership is an association between two or more partners who associate for a common enterprise, and share the profits and losses from that enterprise. It’s perhaps the simplest of business entities. A partnership may exist even when there is no written or oral agreement to form one. It is merely a vehicle for its owners to use to accomplish their business purposes. This means that all profits and losses are passed directly to the owners and the partners are personally responsible for the partnership’s debts and for claims against the partnership. General partners have joint and several liabilities for those debts and claims.

All partners must make a contribution to purchase their interest in the partnership, but there are no limitations on what kind property may be contributed. Partners may participate in the partnership’s management.

A limited partnership is sort of a hybrid of a general partnership and a corporation. It is similar to, but slightly different from, a general partnership in that there are two different kinds of partners. The owners of a limited partnership are its general and limited partners. A limited partnership has got at least one general owner, at least one limited partner, and at least two different partners. In other words, the same person cannot be both the general and the limited partner. The general partners are responsible for the day-to-day operation and management of partnership, while the limited partners have much more restricted roles in its management. The bigger the role a partner plays in managing the partnership, the more likely that partner is to be considered a general partner. The limited partners usually have individual liability for partnership debts and claims against it, while the general partners have joint and several liabilities. All partners must make a contribution to purchase their interest in the partnership. To form a limited partnership, the partners must enter into a written or an oral partnership agreement that is the best way to define everyone’s rights, privileges, and duties.

A limited partnership must use the term “Limited”, “Ltd.”, or “L.P.” in its name.

A corporation is owned by persons, called stockholders. The stock- holders usually have certificates showing the number of shares which they own. The stockholders elect a director or directors to operate the corporation. Most corporations are closed corporations, with only a few stockholders who buy and sell their shares at will. Usually they have little interest in management of the corporations.

A corporation must use “Corporation”, “Incorporated”, “Company”, or an abbreviation of one of those words in its name.

Alien corporations are corporations of foreign countries. All the corporations are to receive their charters from the state authorities. The charters state all the powers of the corporation. Many corporations try to receive their charters from the authorities of the State of Delaware because the laws are liberal there and the taxation is rather low. Such corporations, which receive their charters from an outside state, are called foreign corporations.

All the corporations require a certificate to do business in the state where they prefer to operate.