Corporations are legal entities that are separate from the people that form the corporations. Corporations exist as a product of corporate law and their rules balance the interests of the shareholders. The shareholders invest their capital and the employees of the corporation contribute their labor to the process of gaining an income and providing economic growth within the corporation.
One main feature of a corporation is that the shareholders and employees are not liable for any debt that the corporation may enter if it fails. The shareholders will lose the money they invested into the corporation and the employees will lose their jobs but nothing more. Neither party will be liable for paying off any debts that the corporation falls into.
This aspect of business is known as a limited liability partnership. A limited liability partnership, or LLP for short, involves both corporations and partnerships. The benefit of being a part of an LLP is that one party is not responsible for the other party’s financial problems or debts. The partners are also not liable for each other’s negligence or misconduct. They do not have to answer to anyone if they did not cause the problem.
Another aspect of corporations is an LLC. An LLC stands for Limited Liability Company. An LLC is not that different from an LLC or a corporation but offers pass-through income taxation. An LLP offers the benefits of a partnership and a corporation in that the shareholders are not liable for the company’s debt or other misconducts.
To construct an LLC, each LLC must have at least one member. A member can be another person, another LLC, a corporation or a partnership. An LLC can be taxed in one of many different ways. An LLC can be taxed as an S corporation, a C corporation, a partnership or a sole proprietor.
A Limited Liability Company is more flexible than other partnerships or corporations and usually works best with a single owner. The owners also have limited liability when it comes to the actions and debts of the partnership.
All of these partnerships and corporations fall into one major category of business organizations. A business is defined as a legally recognized firm whose sole purpose is to provide goods and services to consumers. Businesses are usually formed to increase the income of the business owner as well as enter a market that compliments what the business sells.
All business organizations depend on their customers and how often they keep them coming back to purchase more of their services and products. An LLC, an LLP and a corporation are all forms of ownership when it comes to owning a business. Two other forms are sole proprietorship and cooperative ownership.
A sole proprietorship is when one person owns a business organization. The owner can be the only member of the business or could hire a staff of employees. The lone owner is responsible for the business’ actions, misconducts and debts to its creditors.
A cooperative ownership, also known as a ‘co-op,’ is a limited liability where the members share the decision-making authorities. There are no shareholders in a cooperative ownership. Cooperatives come in two forms: consumer or worker cooperatives. A consumer cooperative is a business owned by the business’ consumers. A worker cooperative is a cooperative owned and operated by its employees in a democratic sense.
All businesses, whether it is an LLC, an LLP, a corporation, a cooperative or a sole proprietorship, have to follow rules, regulations and laws laid out by the country they operate within. These laws include proper ethics, contracts and how to properly deal with customers.
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