The words “business” and “organization” are often used interchangeably. A business is simply defined as any entity or association engaged in commercial, or cooperative activities. A business may be for-profit or non-profit entities that function to meet a social purpose or further an educational charity. Any type of organization has the capacity to produce income and profit; the methods of production vary from company to company.
Starting a business requires that you register a business with the appropriate state authority, commonly called “LLC.” An LLC is simply a corporation or LLC, but has the added advantage of being able to limit personal liability. The most common type of LLCs are partnerships, limited liability companies, and corporations. In addition to limiting personal liability, an LLC offers other benefits such as: limited liability, asset protection, and taxation advantages.
Limited Liability Company. An LLC is just one of several types of Limited Liability Company (LLC’s). There are basically two types: A general partnership will be considered a Limited Liability Company even if there are only one partner and one registered office. This also holds true if there are two or more partners in a Limited Liability Company but they are not related to each other. A corporation, as the name suggests, is a separate legal entity from its owners.
Corporation. Businesses are incorporated for different reasons. Some use the structure to protect their intellectual property and assets, others use the structure to avoid lawsuits and ensure the privacy of its shareholders. Business corporations are often created for legitimate business purposes. Some businesses are formed to pool resources or for mutual interests such as reducing costs or increasing profits. Many countries also allow for the incorporation of foreign corporations.
Limited Partnership. In a partnership, one person is generally responsible for managing the partnership. Partnerships may not be taxed. In general, though, partnerships are treated as for profit organizations. That is, if a partnership made no profit, neither the individual partners nor the business itself is taxed. However, if the partners do form a partnership, their income is taxed on both their personal and company profits.
Corporations. Corporations are businesses that have one main office and control their own assets, resources, and profits. They are most often used for larger businesses that require specialized knowledge. This type of businesses are usually publicly traded businesses and are known for making large dividends. The main article in this series will explain the differences between sole proprietorships and corporations and how each one is most often used.