Business Entities Sole Proprietorship and Partnership
A business is a legal entity in which people engage to operate a business. In a normal business, individuals work collectively to create and market goods or services. Other individuals either buy the goods and/or services from the business or hire employees to perform the tasks necessary to conduct the business. The business operator is the individual that hires workers to perform the tasks necessary to run the business.
To operate legally, businesses must have a corporate structure. This consists of the owners or members of the business, each having a right and power of sale and acquisition of shares or other property held by the company. A partnership is formed when more than one member is involved in the business. Private associations are another example of a corporation. In most countries, businesses are classified as either sole proprietorships or partnership.
Each type of business has different rights and responsibilities to its shareholders or partners. For example, a corporation has limited liability. This means that it is not responsible for what the shareholders or partners do if the business becomes bankrupt or is sued by someone. It also protects its shareholder or partner from being personally liable for anything that happens in the business.
Sole proprietorships have the same sort of limitations on liability that corporations have. However, they are only one person, so there is no one to be held personally liable if something happens. Many businesses use the services of one person to run the business, with one taking on all the liability for the activities of the others. A partnership, however, will have to have one director to manage it, and all shareholders must give their consent for any change in ownership.
Another distinction between a corporation and a partnership is that a corporation is often run by an appointed board of directors. The board may not have the power to bind the other shareholders or partners. A private company, on the other hand, is run by an appointed or elected management committee. There are some exceptions, like corporations having unpaid taxes for three or more consecutive years, which are subject to taxation.
Private company owners can be owners individually or members of an LLC (limited liability company). They are considered to be “sole proprietors” if they own the entire business entities sole proprietorship. Partnerships must first form a LLC (limited liability company) and then take out a partnership. One partner usually represents both the LLC and the other, so there is no reason for them to do so separately. Business entities sole proprietorship and partnership are two very complex concepts, but hopefully this overview will help you in your decision to start a business or to expand your existing business.