A business is easily defined as an entity or organization engaging in commercial, productive, or service activities for earning profit. A business can be either for-profit or non-profitable organizations that perform functions to meet a social purpose or further an educational mission. In the United States, a corporation is usually treated as a separate entity from the shareholders whereas a partnership relationship is much more typical in international business. In any case, a business can consist of any number of individual units performing different tasks.
Generally, a corporation is created by filing Articles of Organization with the state or county in which it intends to operate. All corporate officers are listed alphabetically under the name of the corporation, and the corporation becomes a legal entity separate and distinct from its shareholders. The officers of the corporation to serve for the benefit of the shareholders. However, the corporation can create one or more corporate memberships, each of which will have their own liability and asset positions.
A limited liability company, also known as an LLC, forms the core element of a corporation. Limited Liability Company is generally registered at the office of the Secretary of State in their respective state. They can be co-registered with the state as a corporation or separately with the Secretary of State. Limited Liability Companies are often run by a single director, although several may exist at any given time.
The corporation is separated from its creditors by a system of organized management. Its assets, liabilities, and ownership of equity (ownership) are managed by a Board of Directors appointed by the Board of Directors. The responsibilities of the Board of Directors include: selling the Company’s assets, if need be, and paying off its debts, and managing the company’s assets, liabilities, and surplus. The Board is answerable to the shareholders for the corporation’s profits, loss, and value. If the Board fails to make profits and loss, the shareholders will have a right to take the Company into bankruptcy.
There are some differences between a corporation and sole proprietorship, especially in tax situations. With a corporation, all income and expenses are reported individually and shareholders are considered part owners. Sole proprietorships, because they do not report their income and expenses, are subject to double taxation if they ever decide to sell. Income and losses incurred in a partnership are reported individually by the partner(s) and are only taxed once.
There are two primary types of Business Entities: a general partnership and a limited partnership. General partnerships are formed on a day-to-day basis with only one partner. Limited partnerships are formed on a year-round basis with no specific day-to-day partnership. Many businesses, for instance, conduct their business through a general partnership on a continual basis.