Read the text about different types of companies and answer the following questions.

1. What business owner himself takes control of a company and profits and is responsible for all liabilities and debts?

2. What persons is the structure of sole proprietorship useful for?

3. Do partners share profits and losses of the business?

4. When does the partnership dissolve?

5. What type of business dissolves after completion of its project?

6. What type of business can be called “hybrid” entity? Why?

7. What type of company is required to designate a date of its dissolving?

8. What type of company doesn’t need to file its tax return?

9. What company has a more formalized structure?

10. What does “going public” mean?

11. Where does corporation have to register its business and pay taxes?

12. Are shareholders liable for the actions and debts of the corporation?

13. Do directors give the shareholders dividends?

14. Who has the authority to sign contracts and run the corporation?

15. Which type of business is less complicated to start?

What Are the Different Types of Companies?

Sole owner/proprietor (AmE)/sole trader (BE)

A sole proprietorship is one of the most simplest and uncomplicated of all companies. If you’re a sole trader, your business is built around you. The entire operation relies on you, but you can still employ others to help you. You’re 100% responsible for your business’s liabilities and its debts, but you also retain full control of the business and its profits.

The features of the sole proprietorship business organization are:

· Does not require to spend a lot of money to establish a business.

· The dissolution procedure is very easy, simple and quick.

· Any liabilities in business are the proprietor's personal liabilities.

· Whenever the owner dies, the business organization also automatically stops existing.

· The owner has unlimited liability in the organization.

· You even pay tax through your personal IRD (Inland Revenue Department) number.

This form of business structure is useful for people who have an expertise in a certain field and want to make money by applying that knowledge. There is no need to consult other people in the organization before taking any decision and also employees have no stock options. However, when it comes to taxation and other financial aspects, there is no difference between the proprietor's personal life and business, as it is regarded one and the same by the government. It is therefore important to have a good knowledge about these obligations, before deciding to start a sole proprietorship.

Example: Individual tradesperson, such as a self-employed graphic designer, a painter and decorator.

Partnershipis an association of two or more persons (people, corporations, LLC's or others) to carry on, as co-owners, a business for profit. These individuals are responsible for the business, including all liability and any profit or loss. All these members are known as partners and are joint owners of the entire business organization. The partners are accountable for any profit, loss or liability of the business organization. An important feature of this type of company is that all partners enter into a predefined agreement regarding profit sharing and loss bearing, before starting their venture. Irrespective of the capital brought in or the profit-loss sharing percentage of a partner, he can be asked to pay off total debts of the company, as the partners have a joint as well as several liability in the organization. Features are:

· Similar to a sole proprietorship, partnership ventures are simple, easy and quick to form.

· The whole taxation policy and obligations are a little complex, but there is no specific tax for the partnership firm.

· Every partner is jointly and individually liable to the entire firm.

It depends upon the agreement between partners, as to how they would like to run the firm. Dissolution of the firm takes place when a partner turns bankrupt, dies or through a mutual decision between the partners. Partnership firms are broadly divided into three types:

General Partnership: Every partner enjoys equal ownership rights along with profit sharing and loss bearing, unless specifically mentioned in the agreement.

Limited Partnership: In this type, not all partners participate in the running of business. One of them is responsible for this, while others bring in the capital.

Joint Venture is a type of time-based partnership. Two or more individuals may work together for a particular project or for an extension of time. Upon completion, the partnership is dissolved. If the individuals would like to continue to work together after that, they would then register as general partners.

A limited liability company (LLC) is a business entity that combines the limited liability protection of a business corporation with the flexible tax and organizational structure of a partnership. Because LLC have features of both corporations and partnerships, it is called a “hybrid” entity.

LLC's are extremely flexible, and can be used for a very wide range of businesses. Like partnerships, LLC's can be as simple or complex as the members desire. Depending on state law, an LLC can have the same limited liability for members as a corporation, or have some members with limited liability and some without limited liability (like a limited partnership), or even have no limited liability for any members (like a general partnership). Unlike corporations, some States require that their LLC's designate a date in the future at which the LLC will automatically dissolve. Some States also require that if a member dies, goes bankrupt or meets some other calamity the remaining members of the company must either dissolve or vote to continue.

A LLC functions as a limited liability corporation, but is taxed and operated in a way that is most consistent with a Partnership. However, one must ensure that a Limited Liability business does not have more than two of the four qualities that characterize a corporation (limited liability concerning assets; continuity of life; centralization of management; the ability to transfer ownership interests). If more than two of these qualities are met, the Limited Liability becomes a Corporation and is taxed accordingly.

Corporationis a legal entity owned by shareholders but completely separate from them. This means that the corporation itself, not the shareholders that own it, is held legally liable for the actions and debts incurred by the business. It also means that shareholders have no direct rights to the money or any other assets of the corporation. If the directors choose to give the shareholders dividends, that’s great. Otherwise, shareholders get nothing from the corporation until they sell their shares.

The shareholders elect one or more people to serve on the board of directors. In turn, the Board of Directors exists to govern the corporation and set its policies and priorities, approve major business decisions, and appoint officers. The officers hold titles such as president, secretary and treasurer, and are the only ones with authority to sign contracts and to run the corporation on a day to day basis.

Corporations are more structured than other business types. Companies that are positioned for growth and seeking outside investment generally prefer to use corporations. In order to attract this outside investment, corporations often end up with more costly administrative fees and complex tax and legal requirements. Corporations offer the ability to sell ownership shares in the business through stock offerings. “Going public” through an initial public offering (IPO) is a major selling point in attracting investment capital and high quality employees. Corporations also have the ability to issue stock options as a way to recruit and reward management, staff and investors.

Date: 2015-12-24; view: 1003