Types of Business Organizations
Generally, businesses are legally organized in one of three forms:
This is a business owned and operated by a single individual.
- The law makes no distinction between the individual and the business, so the individual assumes unlimited liability.
- The individual owner may face challenges in raising capital.
- Ownership of the sole proprietorship is transferred only by the full sale of the business.
This is a business owned by multiple individuals.
- The owners of a partnership share in the unlimited legal liability risk.
- The ownership of a partnership cannot be transferred.
- Typically, the partners will use mutually agreed legal contracts to manage conflicts of interest among themselves.
- A partnership may be able to more easily raise capital than a sole proprietorship, but not as easily as a corporation.
This business is chartered by the laws of a government body. The corporation, unlike the sole proprietorship or partnership, is a legally distinct entity from its owners.
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