The most common type of business is a sole-proprietorship. This is where one person controls a business. A sole-proprietor can be either a company or an individual. For example, a sole-proprietor can be the sole shareholder in a business. However, a sole-proprietor cannot own more than ten percent of a business. In most cases, a sole-proprietor is required to register its name in the state where it resides. In addition, a sole-proprietor cannot hire employees and is not responsible for general financial matters such as taxation, insurance, licenses, or debts.
Another common form of business ownership is a corporation. A corporation is a separate legal entity from a business. A corporation is usually set up for profit and is called a partnership. A corporation is different from a sole-proprietor in that a corporation does not have to keep records and is not required to file tax returns. In addition, it is not required to give employees an ownership interest in the business. If a corporation does not file tax returns, there is no need for an accountant.
A third type of business is a partnership. A partnership is formed by a number of individuals with common business interests. Most partnerships are registered under state law in the state where the business is located. Partnerships may not be required to file tax returns and must not own more than fifteen percent of a business. A limited liability partnership, also known as an LVP, is a type of partnership that has limited liability.
A limited liability partnership (LLP) is a type of partnership that has only one owner and one partner. An LLC is similar to a corporation but is also referred to as a partnership. An LLC will not be required to file tax returns, unless it has elected to be treated as an S corporation. There is no need to register the LLC’s name in a state because it is legally treated as an entirely separate entity.
There are many other forms of business ownership, but these four are the most common. There may be variations on these basic definitions, such as the type of entity held by a business owner or the type of ownership held by an LLC. Each business type holds the right to earn profits, loss, manage assets, and hold its own legal title to a business. All business types should be well described in the company’s Articles of Organization, and in the Business License Agreement.