A business is broadly defined as an entity or organization duly authorized by a government to carry out commercial, agricultural, or communal activities for profit. Businesses may be either for-profit or non-profitable organizations that conduct primarily to meet a social objective or further an educational mission. A company is the common example of a business organization. In recent years, other types of organizations sharing similar characteristics have come into existence such as cooperatives, corporations, and partnerships. The following discussion provides an explanation of the basic differences between a business and other types of organizations.
Most businesses are profit-oriented enterprises whose primary goal is to make a profit by conducting commerce. However, many businesses have additional goals like building supplies for homes or farms, providing energy or water services, and creating jobs. A number of countries have legal systems with corporations that have very limited operations. Other countries allow only women and certain groups of people to own businesses bizop .
A business requires legal structure to enable it to legally exist and operate. One important requirement is that the ownership is cooperative. Business structures can include one or more partners who act as directors and who control the business through the partnership they have formed. There are also joint ventures, which are a combination of two or more businesses working together.
Another requirement is that a business must have a board of directors. The board of directors is the governing body that appoints the managers and other personnel. A corporation has one or more general partners who are also members of the corporation. Partners are liable for the debts of the corporation and cannot be held personally liable for the corporation’s actions. For instance, if one of the partners is bankrupt, the partnership is immediately dissolved.
A partnership is a mixture of several legal forms. A partnership has one or more members, whereas a corporation has one or more owners. A partnership is only a formal arrangement until the partners decide how their properties will be used in exchange for the profits of the partnership. If the partners agree on using the property equally, then the partnership will be considered an LLC (limited liability company). However, if the profits are to be divided among the partners, then a corporation will be created.
A corporation is created by filing Articles of Organization with the state in which the corporation is registered. Articles of Organization should contain the names of all the members of the corporation and their addresses. All corporations must publicly file a report of their general meeting every year with the secretary of state detailing all meetings of the corporation.
All corporations and partnerships are personally liable for taxes, although some only have one level of taxation. Corporations and partnerships are both formally registered for corporate income at the state and federal levels. When businesses incorporate, they get the name of the business they will be using as their trade name, whereas sole proprietorships may only use their name as the trade name of the business. All corporations and partnerships must pay taxes on personal income and dividends.
S-corp and B-corp are the two main types of corporations. In a S-corp, the shareholders of the corporation are treated as owners, just like sole proprietorships. The difference between a partnership and sole proprietorship is that a partnership is formally registered with the state as a business organization, and all the members are taxed as business owners. A sole proprietorship, on the other hand, is not formally registered and there are no tax obligations.
There are many differences in the treatment of partnerships and sole proprietorships. One of them is the way that flow-through taxation is assessed. Under flow through taxation, income is taxed on the amount of income that actually passes through a partnership or sole proprietorship, rather than on the part of the principal. This means that a partnership or sole proprietorship would be taxed on its income before its pass-through is deducted, and this can result in double taxation for businesses.
One way that this occurs is when the partners in a partnership or sole proprietorship are allowed to shield their personal assets from taxation by signing an agreement. Every partner in a partnership or corporation can agree to such an agreement, called an operating agreement. The main thing to be noted about these agreements is that they are generally limited in duration, which means that the company may only operate for a specified period of time. It is because of this limitation that partnerships and sole proprietorships often fail to comply with their ICICI policy, because of their inability to meet the requirements of their agreement.
The other main difference between business owned and partnership is the ownership structure. A partnership’s profit is divided between all of the partners; this is done after a certain percentage has been paid to the partner who had been the primary owner. However, a sole proprietorship is the same as the corporation. It begins with one owner and has no partners. It continues to grow until the company reaches a point where it will then be sold off. However, unlike a partnership which requires that a certain percentage of profits to be paid to the partners, sole proprietorship only requires that the primary owner is paid his or her profits.