FORMS OF BUSINESS ORGANIZATION

FORMS OF BUSINESS ORGANIZATION

Introduction and Understanding of

Three Principal Forms of Business Organization Essential Attributes and Characteristics Analyzing Business Needs and
Selecting Appropriate Business Form

FORMS OF BUSINESS ORGANIZATION

Organizational Forms determined by

Owners Objectives: Liability, Profit Distribution, Taxation and Capital Structure Dealings with Outside World: Other Owners,

Heirs, Employees, Customers and Future Owners of Business Legislative Goals: Special-Purpose Entities to encourage investments, in, for example, Small Businesses or Affordable Housing

FORMS OF BUSINESS ORGANIZATION

Three Organizational Forms developed by Business Owners

Sole Proprietorship General Partnership Corporation

FORMS OF BUSINESS ORGANIZATION

DEFINITIONS
Sole Proprietorship General Partnership Corporation

Any Business Owned and Operated by an Individual

Two or More Persons Operating a Business for a Profit

Legislatively Created and Regulated Governance, Ownership and Financial Structure

FORMS OF BUSINESS ORGANIZATION

FORMATION
Sole Proprietorship General Partnership Corporation

No Formalities or Legal Documentation; May be Implied from Conduct or Actions

Filing of Articles Written or Oral of Incorporation Agreement or with Secretary of May be Implied State and from Conduct or Payment of Actions Fees

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GOVERNING DOCUMENTS
Sole Proprietorship General Partnership Corporation

None Required

None Required; Most have Agreement specifying Rights, Duties and Obligations

Articles of Incorporation create Corporation; Bylaws prescribe its Operation

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NATURE OF OWNERSHIP
Sole Proprietorship General Partnership
Corporation

For Contribution, Partner receives Wholly Owned Proportionate Share by Single of Profits/Losses Individual and Partnership Property

Residual

Claim on Corporate Equity and Right to Vote for Directors and Essential Governance

FORMS OF BUSINESS ORGANIZATION

LIABILITY
Sole Proprietorship General Partnership Corporation

Sole Proprietor Partners are Jointly Personally and Severally Liable Liable for All for all Partnership Debts and Obligations, in Obligations Contract and in Tort

Shareholders
Liability limited to Extent of Capital Contribution [Limited Liability]

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TAXATION
Sole Proprietorship General Partnership Corporation

Not a Taxable Entity; Income (Loss) passes through to Sole Proprietor

Partnership not a Taxable Entity; Allocations of Income and Loss allowed within Partnership before Pass-Through

Corporation

taxed as Separate Entity and Dividends/Capital Gains also Taxed [Double Taxation]

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MANAGEMENT
Sole Proprietorship General Partnership Corporation

Sole Proprietor has Complete Management Control

All Partners have Equal Rights in Partnerships Management and Conduct

Managed by

Board of Directors elected by Shareholders; Board may Delegate Authority to Appointed Officers

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TRANSFER OWNERSHIP INTERESTS

Sole Proprietorship General Partnership Corporation

Sole Proprietorship not Limited Right of Transferable; Transfer subject Property and to Consent by all Products are Partners Transferable

Freely Transferable through Formal (NYSE) and Informal (Private Equity) Capital Markets

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WITHDRAWAL OF OWNER
Sole Proprietorship General Partnership Corporation

Terminates Sole Proprietorship

Partner Death or Withdrawal may Terminate Partnership

Corporation has Unlimited Life

FORMS OF BUSINESS ORGANIZATION

SPECIAL PURPOSE ENTITIES

Limited Partnership Limited Liability Corporation (LLC) Subchapter S Corporation

General Partner (Manager with Hybrid with Identical to C Unlimited Corporate Liability Corporation except Liability) and Protections and Right to Elect Limited Partner Partnership Tax Income/Losses (Investors with Treatment Pass-Through Limited Liability)