Which refers to a business owned by two or more persons who contribute resources into the entity it divides the profits of the business among themselves?
By Indeed Editorial Team Show
Updated March 31, 2021 | Published April 17, 2020 Updated March 31, 2021 Published April 17, 2020 The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey. Starting a business involves making many important decisions, especially in terms of choosing the right form of business structure. Taking enough time to research your options and understand how each of the major organization structures work may help you make the best choice for your company. In this article, we discuss the major forms of business structures, including the advantages and disadvantages of each, and how to choose the right structure for your needs. What are the five forms of business organizations?The five forms of business organizations include the following:
PartnershipYou can classify a business partnership as either general or limited. General partnerships allow both partners to invest in a business with 100% responsibility for any business debts. They don't require a formal agreement. In comparison, limited partnerships require owners to file paperwork with the state and compose formal agreements that describe all of the important details of the partnership, such as who is responsible for certain debts. Some advantages of partnerships include:
Disadvantages to consider:
An example of a partnership is a business set up between two or more family members, friends or colleagues in an industry that supports their skill sets. The partners of a business typically divide the profits among themselves. CorporationA corporation is a business organization that acts as a unique and separate entity from its shareholders. A corporation pays its own taxes before distributing profits or dividends to shareholders. There are three main forms of corporations: a C corporation, an S corporation and an LLC, or limited liability corporation. Advantages of corporations include:
Disadvantages include:
Common examples of corporations include a business organization that possesses a board of directors and a large company that employs hundreds of people. About half of all corporations have at least 500 employees. Related: Corporate Life Cycle: Everything You Need to Know Sole proprietorshipThis popular form of business structure is the easiest to set up. Sole proprietorships have one owner who makes all of the business decisions, and there is no distinction between the business and the owner. Advantages of a sole proprietorship include:
Disadvantages include:
Some typical examples of sole proprietorships include the personal businesses of freelancers, artists, consultants and other self-employed business owners who operate on a solo basis. Related: What Is Equity? Tips for Small Business Owners CooperativeA cooperative, or a co-op, is a private business, organization or farm that a group of individuals owns and runs to meet a common goal. These owners work together to operate the business, and they share the profits and other benefits. Most of the time, the members or part-owners of the cooperative also work for the business and use its services. Advantages of a cooperative include:
Disadvantages include:
Many cooperatives exist in the retail, service, production and housing industries. Examples of businesses operating as cooperatives include credit unions, utility cooperatives, housing cooperatives and retail stores that sell food and agricultural products. Limited liability companyThe most common form of business structure for small businesses is a limited liability company, or LLC, which is defined as a separate legal entity and may have an unlimited amount of owners. They are typically taxed as a sole proprietorship and require insurance in case of a lawsuit. This form of business is a hybrid of other forms because it has some characteristics of a corporation as well as a partnership, so its structure is more flexible. Some advantages of an LLC include:
Some disadvantages include:
Common examples of limited liability companies include start-ups and other small businesses. Family-owned businesses and companies with a small number of members may operate as an LLC because it is a flexible business model that allows members to be active or passive in their roles. How do you choose a form of business?Before you make your business official, consider the following steps to help you decide which form is best for your needs: 1. Find your passionSuccessful business owners build a business around what they love doing the most. People who have a passion for making specialty items or a desire to change the world by offering a unique service may choose to form a start-up that allows for flexibility and creativity. Once you have a solid understanding of your goals, it is easier to move on to the next stage of planning. Related: How to Find Your Passion 2. Discuss the detailsDiscuss your final business plan with other members of your business, if applicable, to ensure that everyone clearly understands future business operations. After this, you can choose the structure that best serves your needs. If your business has more than one owner or decision-maker, it is important to create a written agreement that details the specifics of your business plan, including costs, responsibilities, goals and timelines. You also have to decide on a business name, determine funding and find the perfect location. 3. Review the common business structuresOnce you have decided on the most important details related to your business, you can decide which business structure works best for your plan. The legal form your business takes determines your risk in the business, including your eligibility for financial returns. Knowing which business structure best serves your needs depends on many factors, including the number of people involved and their desired roles, as well as your future goals. Review the five most common types of structures thoroughly to decide which plan works best for you and your business before moving ahead with the registration process. What is it called when a business is owned by two or more persons?Partnerships. A partnership is like a sole proprietorship in that it is simply a business that is owned by two or more people.
What type of business is owned by two or more persons who agree to contribute resources such as money property and skills needed to operate the business?In fact, there are four main types of business entities: a partnership, a sole proprietorship, a corporation and a limited liability company. A partnership business, by definition, consists of two or more people who combine their resources to form a business and agree to share risks, profits and losses.
What form of business consists of two or more people to carry on as co owners of a business for profit?General Partnership: An agreement by two or more persons (or entities) to carry on, as co-owners, a business for profit.
What are the 4 types of business forms?An overview of the four basic legal forms of organization: Sole Proprietorship; Partnerships; Corporations and Limited Liability Company follows. Please also review this summary of non-tax factors to consider.
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