What is the different classification of businesses by ownership and control of resources
Answers
Explanation:
Classification of business according to ownership describes the different business structures available for small business owners
1. Sole Proprietorships
2. General Partnerships
3. Limited Partnerships
4. C Corporations
5. S Corporations
6. Limited Liability Companies (LLCs)
Answer:
Types of Businesses Opener
#1 Sole Proprietorship
A sole proprietorship is an unincorporated company that is owned by one individual only. While it is the most simple of the types of businesses, it also offers the least amount of financial and legal protection for the owner. Unlike partnerships or corporations, sole proprietorships do not create a separate legal identity for the business. Essentially, the owner of the business shares the same identity as the company. Therefore, the owner is fully liable for
Limited Liability Partnerships (LLP): LLPs are similar to general partnerships, where multiple partners are each responsible for the operations of the business. However, partners in LLPs are not personally responsible for the actions of other partners or the debts of the business. Unfortunately, not all businesses can be LLPs. This type of business is often restricted to certain professions, such as lawyers or accountants.
In general, as compared to other types of businesses, partnerships offer more flexibility but also have greater exposure to risk.
#3 Limited Liability Company (LLC)
Limited liability companies (LLCs) are one of the most flexible types of businesses. LLCs combine aspects of both partnerships and corporations. They retain the tax benefits of sole proprietorships and the limited liability of corporations. LLCs are able to choose between different tax treatments. As long as the LLC chooses not to be treated as a C corporation, it retains its flow-through taxation status.
Additionally, LLCs benefit from limited liability status. In LLCs, the company exists as its own legal entity. This protects the owners of the LLCs from being personally liable for the operations and debts of the business.
#4 Corporation
Corporations are a separate legal entity created by shareholders. Incorporating a business protects owners from being personally liable for the company’s debts or legal disputes. A corporation is more complicated to create, as compared to the other three types of businesses. Articles of incorporation must be drafted, which include information such as the number of shares to be issued, the name and location of the business, and the purpose of the business.
In sole proprietorships and partnerships, if one of the owners passes away or declares bankruptcy, the company is dissolved. Corporations exist as a legally separate entity. Therefore, they are protected from this situation and will continue to exist even if the owner of the business passes away.
There are three main types of corporations:
C Corporation: This is the most common form of incorporation. The corporation is taxed as a business entity and owners receive profits that are then also taxed individually.
S Corporation: This is similar to a C corporation but may only consist of up to 100 shareholders. S corporations are pass-through entities like partnerships, so profits are not taxed twice.
Non-Profit Corporation: Often used by charitable organizations, non-profit corporations are tax exempt. All forms of incoming cash flow must be utilized to spend on the organization’s operations or future plans.
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Examples of Types of Businesses
Many businesses begin as sole proprietorships, as this type of business is great for many new, small businesses. As they grow and expand, many businesses tend to convert to corporations. eBay is a very famous example of a sole proprietorship that eventually converted into a corporation.
Hewlett-Packard (HP) is an example of an incredibly successful and famous partnership. Like eBay, as they grew, they eventually incorporated in 1947. However, the company began as a business partnership between two friends.