3 Legal Forms of Business Ownership
A companyAn artificial person created by law, with the most legal rights of a real person. “is an artificial person created by law, with most of the legal rights of a real person. These include the rights to establish and operate a business, to buy or sell property, to borrow money, to sue or be sued, and to enter into binding contracts ” William M. Pride, Robert J. Hughes, and Jack R. Kapoor, Business (Boston: Houghton Mifflin, 2008), at page 157. (see Table 12.3 “Company: A Summary of Characteristics”). Companies account for 20% of all businesses in the United States, but they account for nearly 90% of sales. Jeff Madura, Introduction to Economics (St.
Paul, MN: Paradigm Publishers International, 2010), page 150 Although some small businesses are registered, many companies are very large companies – for example, Walmart, General Electric, Procter & Gamble and Home Depot. Recent data shows that only about half of small business owners in the U.S. operate registered businesses. Matthew Bandyk, “Turning Your Small Business into a Corporation,” US News & World Report, March 14, 2008, accessed February 3, 2012 money.usnews.com/money/business-economy/small-business/articles/2008/03/14/turning-your-small-business-into-a-corporation. In a company, the owners are called shareholders. They have limited liability for the company`s shares, but they also have limited participation in day-to-day operations. It is one of the most complicated forms of business in terms of taxes, accounting and general paperwork. Shareholders report the money they earn on their personal income tax returns, allowing them to avoid the double taxation that occurs in other forms of business.
When starting your business, choosing a legal structure is one of the first and most important decisions you need to make.3 min read In the United States, a limited liability company is a business entity that provides a partnership or sole proprietorship with the protection of a limited liability company, creating the best of both worlds for business owners. By forming an LLC, only the LLC is liable for debts and liabilities incurred by the company – not by the members. Members` liability is limited to the personal interest they have invested in the company, thereby protecting the individual member`s personal assets that are separate from the LLC. LLCs have quickly become one of the most popular business structures for new and small businesses, largely because they are considered simpler and more flexible than a business. When you form an LLC, your business becomes its own legal entity with separate debts and legal issues. One of the first decisions you need to make when starting a business is to determine the right legal structure for your business. “If you want to be your own boss and run a home-based business without a physical storefront, you can have full control with a sole proprietorship,” said Deborah Sweeney, CEO of MyCorporation. “This company doesn`t offer separation or protection of personal and business assets, which could prove to be a problem as your business grows and more and more aspects hold you accountable.” A legal form of ownership in which ownership shares are listed on the stock exchange and management is carried out by professional executives. There are several types of businesses in Canada: a Canadian-controlled private corporation (CCPC); a body governed by public law; an undertaking controlled by a body governed by public law; and another company (you guessed it: the kind of business that doesn`t fit into any of the other categories). Legally, shareholders or owners of companies cannot be held legally responsible for the shares of companies, their financial risk is limited to the value of the shares they own. Where is your business going and what kind of legal structure enables the growth you envision? Turn to your business plan to review your goals and see which structure best suits those goals. Your business needs to support the opportunity for growth and change, not deter it from its potential.
We`ve outlined the four most common corporate legal structures with considerations for each below, including taxes, liability, and formation of each. Ready? A company that is not registered with two or more owners/partners who are personally responsible for the responsibilities of the companies is the most complex business structure. A company is a legal person that is distinct and independent of the persons who own or manage the company, namely the shareholders. A company has the ability to enter into contracts separate from those of the shareholders, but it also has certain responsibilities such as paying taxes. Firms are generally more suitable for large established businesses with multiple employees or where other factors apply (e.g., .
